BUS 150 FINAL EXAM STUDY GUIDE
Model of Choice - Answer -Economics is the study of choice. How do people make
choices over use of scarce resources? People acting in their own self interest seeking
to make the best use of their resources follow the decision rule:
o If the Marginal Benefit (MB) > Marginal Cost (MC), do it.
subjective value and voluntary exchange - Answer -Voluntary exchanges move
resources from low value to high value uses. This creates value for both parties. It
additionally makes use of subjective value of resources.
o "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect
our dinner, but from their regard to their own interest." Adam Smith
Speacialization - Answer -Specialization increases output and productivity. The role of
markets and trade expand in order to facilitate the capture of wealth from added output
generated by specialized process.
Wealth creation through specialization - Answer -The larger the extent or reach of the
market - the more opportunities for wealth to be created through specialization and
trade.
price system - Answer -o Allows us to use our local knowledge about opportunities we
have for our resources and the subjective value we place on those resources to interact
with a network of consumers and producers around the globe.
o Is highly efficient and coordinated.
invisible hand - Answer -As every individual, therefore, endeavors as much as he can
both to employ his capital in the support of domestic industry, and so to direct that
industry that its produce may be of the greatest value; every individual necessarily
labours to render the annual revenue of the society as great as he can. He generally,
indeed, neither intends to promote the public interest, nor knows how much he is
promoting it. By preferring the support of domestic to that of foreign industry, he intends
only his own security; and by directing that industry in such a manner as its produce
may be of the greatest value, he intends only his own gain, and he is in this, as in many
other cases, led by an invisible hand to promote an end which was no part of his
intention. Nor is it always the worse for the society that it was no part of it. By pursuing
his own interest he frequently promotes that of the society more effectually than when
he really intends to promote it.
competition - Answer -o Motivates effort, strategy and performance.
o Competition role in encouraging discovery and innovation
economic area - Answer -drives prices lower, motivates search for efficiencies,
encourages experimentation, innovation, and entrepreneurial discovery.
Model of Choice - Answer -Economics is the study of choice. How do people make
choices over use of scarce resources? People acting in their own self interest seeking
to make the best use of their resources follow the decision rule:
o If the Marginal Benefit (MB) > Marginal Cost (MC), do it.
subjective value and voluntary exchange - Answer -Voluntary exchanges move
resources from low value to high value uses. This creates value for both parties. It
additionally makes use of subjective value of resources.
o "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect
our dinner, but from their regard to their own interest." Adam Smith
Speacialization - Answer -Specialization increases output and productivity. The role of
markets and trade expand in order to facilitate the capture of wealth from added output
generated by specialized process.
Wealth creation through specialization - Answer -The larger the extent or reach of the
market - the more opportunities for wealth to be created through specialization and
trade.
price system - Answer -o Allows us to use our local knowledge about opportunities we
have for our resources and the subjective value we place on those resources to interact
with a network of consumers and producers around the globe.
o Is highly efficient and coordinated.
invisible hand - Answer -As every individual, therefore, endeavors as much as he can
both to employ his capital in the support of domestic industry, and so to direct that
industry that its produce may be of the greatest value; every individual necessarily
labours to render the annual revenue of the society as great as he can. He generally,
indeed, neither intends to promote the public interest, nor knows how much he is
promoting it. By preferring the support of domestic to that of foreign industry, he intends
only his own security; and by directing that industry in such a manner as its produce
may be of the greatest value, he intends only his own gain, and he is in this, as in many
other cases, led by an invisible hand to promote an end which was no part of his
intention. Nor is it always the worse for the society that it was no part of it. By pursuing
his own interest he frequently promotes that of the society more effectually than when
he really intends to promote it.
competition - Answer -o Motivates effort, strategy and performance.
o Competition role in encouraging discovery and innovation
economic area - Answer -drives prices lower, motivates search for efficiencies,
encourages experimentation, innovation, and entrepreneurial discovery.
