EEE Final Exam UPDATED ACTUAL
Exam Questions and CORRECT Answers
Benefits of human beings being social animals - CORRECT ANSWER -We can share
tools and teach others how to use tools
-We can become so skillful that we can do favors for other people by exchanging tools
-We have vocal chords that make us able to make a range of complicated sounds that enable us
to communicate subtle ideas
-We have the intelligence to pick up ideas from people older/wiser than us and to recognize new
ideas
-If human beings had been hermits rather than social animals, none of these special
characteristics would be all that special
Ethical Decisions - CORRECT ANSWER Every business decision is an ethical decision
Ethics - CORRECT ANSWER The subject of how people have to live in order for the
world to be a better place with them than without them
Trade - CORRECT ANSWER -To exchange services
-Cooperation for mutual benefit
-It makes everyone better off!
Zero-Sum Game - CORRECT ANSWER -A game where no one gains unless someone
else loses
,-EX: poker
Specialization - CORRECT ANSWER An individual, business, or industry focuses on the
producing a limited scope of products or services in order to gain a greater degree of productive
efficiency within an overall system
Property Rights - CORRECT ANSWER -Property laws are people's right concerning the
ownership of things
-These laws govern the ownership of both public and private property, and they are used to
resolve disputes over property transactions
-Property laws are created to internalize externalities
---> Owners have the right to exclude nonowners
---> Resources can be conserved
---> Bystanders can insulate themselves from external costs
Factors of Production - CORRECT ANSWER -Land
-Labor
-Capital
-Entrepreneurship
-Time
, Opportunity Cost - CORRECT ANSWER -The loss of potential gain from other
alternatives when one alternative is chosen
-All economic decisions yield opportunity costs
-You make a decision based on what option will benefit you more or what option will cost you
less
Institutions - CORRECT ANSWER -Durable frameworks for interaction and mutual
expectation, which include shared rules, customs, beliefs, and meanings
-They are beneficial by...
---> Helping people coordinate their social action
---> Allowing people to know what to expect from each other and how to interact in beneficial
ways
---> Providing clever ways to act without much cognition or thinking.
---> Facilitating trade by lowering the transaction cost of trade
Money - CORRECT ANSWER -Anything that serves as a medium of exchange, a unit of
account, and a store of value
-It drastically lowers transaction costs in the market
-U.S. dollar is fiat money
---> Backed only by people's faith in the monetary system
Exam Questions and CORRECT Answers
Benefits of human beings being social animals - CORRECT ANSWER -We can share
tools and teach others how to use tools
-We can become so skillful that we can do favors for other people by exchanging tools
-We have vocal chords that make us able to make a range of complicated sounds that enable us
to communicate subtle ideas
-We have the intelligence to pick up ideas from people older/wiser than us and to recognize new
ideas
-If human beings had been hermits rather than social animals, none of these special
characteristics would be all that special
Ethical Decisions - CORRECT ANSWER Every business decision is an ethical decision
Ethics - CORRECT ANSWER The subject of how people have to live in order for the
world to be a better place with them than without them
Trade - CORRECT ANSWER -To exchange services
-Cooperation for mutual benefit
-It makes everyone better off!
Zero-Sum Game - CORRECT ANSWER -A game where no one gains unless someone
else loses
,-EX: poker
Specialization - CORRECT ANSWER An individual, business, or industry focuses on the
producing a limited scope of products or services in order to gain a greater degree of productive
efficiency within an overall system
Property Rights - CORRECT ANSWER -Property laws are people's right concerning the
ownership of things
-These laws govern the ownership of both public and private property, and they are used to
resolve disputes over property transactions
-Property laws are created to internalize externalities
---> Owners have the right to exclude nonowners
---> Resources can be conserved
---> Bystanders can insulate themselves from external costs
Factors of Production - CORRECT ANSWER -Land
-Labor
-Capital
-Entrepreneurship
-Time
, Opportunity Cost - CORRECT ANSWER -The loss of potential gain from other
alternatives when one alternative is chosen
-All economic decisions yield opportunity costs
-You make a decision based on what option will benefit you more or what option will cost you
less
Institutions - CORRECT ANSWER -Durable frameworks for interaction and mutual
expectation, which include shared rules, customs, beliefs, and meanings
-They are beneficial by...
---> Helping people coordinate their social action
---> Allowing people to know what to expect from each other and how to interact in beneficial
ways
---> Providing clever ways to act without much cognition or thinking.
---> Facilitating trade by lowering the transaction cost of trade
Money - CORRECT ANSWER -Anything that serves as a medium of exchange, a unit of
account, and a store of value
-It drastically lowers transaction costs in the market
-U.S. dollar is fiat money
---> Backed only by people's faith in the monetary system
