G202 Exam 1 Practice Test 2026 – 180 Questions & Answers | Public Choice, Market Efficiency, Uber, Ventria, Property Rights & Music Industry Economics | Kelley School of Business, Indiana University

This document contains approximately 180 exam-style questions and verified answers covering the core concepts assessed in G202 Exam 1 at the Kelley School of Business, Indiana University. The material provides comprehensive coverage of market efficiency, public choice economics, lobbying, special-interest politics, entrepreneurship, property rights, intellectual property, crime economics, Uber's disruptive business model, Ventria Bioscience, music-industry disruption, Spotify, Apple, digital piracy, and non-market strategy. Presented in a detailed question-and-answer format, this study guide is designed to help students prepare for examinations while developing a strong understanding of how economic theory applies to business strategy, public policy, innovation, and technological disruption. A major portion of the document focuses on corporate social strategy and non-market economics, examining how firms respond to political, social, economic, and technological forces outside traditional competitive markets. Students learn how organizations integrate societal concerns into business strategy, manage non-market risks, engage with politicians and activists, and create value through stakeholder relationships. The guide explores the well-known BP Beyond Petroleum case, analyzing how environmental concerns, socially responsible investing (SRI), climate-change initiatives, and stakeholder expectations influenced BP's branding, investment attraction, employee recruitment, and public reputation. The material also examines NGO activism, greenwashing concerns, and the challenges firms face when sustainability branding creates higher public expectations. The document provides extensive coverage of public choice economics, lobbying, and political decision-making. Topics include rent-seeking behavior, special-interest effects, rational ignorance, vote-maximizing politicians, budget-maximizing bureaucrats, lobbying strategies, coalition formation, client politics, entrepreneurial politics, interest-group politics, and majoritarian politics. Students learn how concentrated benefits and dispersed costs influence public policy outcomes and why organized interest groups often exert greater political influence than larger but less coordinated populations. These concepts closely align with the public-choice framework developed in The Calculus of Consent by James Buchanan and Gordon Tullock. A substantial section examines market efficiency, social efficiency, taxation, subsidies, and government regulation. Students review consumer surplus, producer surplus, equilibrium analysis, socially efficient output levels, deadweight loss, market failures, and policy interventions. Topics include taxes, subsidies, productive regulations, supply-curve shifts, compliance costs, government inefficiencies, and the circumstances under which public policy can either improve or reduce economic efficiency. The material reinforces the principle that socially efficient production occurs when marginal value equals marginal cost and examines how public policy affects resource allocation within markets. These concepts align closely with Principles of Economics by N. Gregory Mankiw and Microeconomics by Robert Pindyck and Daniel Rubinfeld. The guide also delivers comprehensive instruction on entrepreneurship, innovation, and creative destruction. Topics include explicit costs, implicit costs, economic profit, normal returns, entrepreneurial discovery, intrapreneurship, innovation incentives, technological change, and market disruption. Students learn how entrepreneurs identify profitable opportunities, introduce new products, reduce production costs, and challenge incumbent firms. The document explores the concept of creative destruction, explaining how technological innovation replaces less efficient industries and how governments sometimes intervene to protect established businesses from disruptive competitors. Another major section focuses on property rights and intellectual property economics. Students examine communal property rights, government property rights, private property rights, patents, trademarks, copyrights, voluntary exchange, resource conservation, and innovation incentives. The material explains how secure property rights encourage investment, technological development, entrepreneurship, and efficient resource use. Detailed coverage of intellectual-property protection highlights the economic importance of patents, copyrights, and trademarks in supporting innovation and market competition. The document provides extensive analysis of the Uber case study, one of the most important applications of technological disruption in the course. Students evaluate Uber's two-sided market platform, competitive advantages, surge pricing, regulatory challenges, lobbying efforts, network effects, consumer benefits, driver incentives, cultural legitimacy, and political opposition from the taxi industry. Topics include technological PEST shocks, ride-sharing regulation, interest-group politics, lobbying strategies, regulatory avoidance, and market-entry barriers. The material also examines potential threats to Uber's business model, including legal challenges, artificial intelligence, competitive disruption, and regulatory intervention. A substantial section examines the Ventria Bioscience case, focusing on genetically modified rice production, stakeholder management, political risk, regulatory approval, activist opposition, economic interests, and biotechnology innovation. Students analyze the roles of rice farmers, environmental activists, food-safety advocates, government agencies, investors, and international stakeholders. Topics include PEST analysis, stakeholder leverage, lobbying dynamics, regulatory uncertainty, and strategic alternatives available to biotechnology firms operating in politically sensitive industries. The guide also explores crime economics and Gary Becker's Economic Model of Crime. Students learn how criminal behavior can be analyzed through expected utility, punishment severity, probability of detection, enforcement costs, and incentives. The material examines online file-sharing, copyright enforcement challenges, digital piracy, and the limitations of international intellectual-property enforcement. These concepts are based on Gary Becker's seminal article, Crime and Punishment: An Economic Approach (1968). Another major portion focuses on music-industry disruption, digital piracy, Apple, iTunes, and Spotify. Students examine how technological innovation transformed the traditional music value chain through digital downloads, file sharing, streaming services, and mobile devices. Topics include copyright protection, network effects, winner-take-all markets, switching costs, platform competition, digital distribution, iTunes, Spotify, Apple's first-mover advantage, streaming economics, royalty payments, and artist-distributor relationships. The document explores why Spotify has struggled with profitability despite rapid growth and evaluates the strategic challenges facing digital music platforms in highly competitive markets. The content closely aligns with coursework in Microeconomics, Managerial Economics, Public Choice Economics, Political Economy, Business Strategy, Innovation Economics, Law and Economics, and Technology Management. Key references include Principles of Economics by N. Gregory Mankiw, Microeconomics by Robert Pindyck and Daniel Rubinfeld, The Calculus of Consent by James Buchanan and Gordon Tullock, Crime and Punishment: An Economic Approach by Gary Becker, and leading literature on platform economics, entrepreneurship, and technological innovation. This document is particularly valuable for students enrolled in G202 Economics, Microeconomics, Managerial Economics, Business Economics, Business Administration, Political Economy, Public Policy, Finance, Technology Management, Entrepreneurship, Law and Economics, and Innovation Management programs. It is also highly beneficial for Kelley School of Business students, economics majors, MBA candidates, consulting applicants, policy-analysis students, and professionals seeking a deeper understanding of market dynamics, public policy, and disruptive innovation. Keywords: G202, G202 Exam 1, Kelley School of Business, Indiana University, public choice economics, market efficiency, social efficiency, consumer surplus, producer surplus, taxes, subsidies, productive regulation, lobbying, rent seeking, special interest effect, rational ignorance, vote maximizing politicians, budget maximizing bureaucrats, client politics, entrepreneurial politics, interest group politics, majoritarian politics, entrepreneurship, intrapreneurship, economic profit, explicit costs, implicit costs, creative destruction, property rights, private property rights, communal property rights, patents, trademarks, copyrights, intellectual property rights, Becker crime model, expected utility, digital piracy, file sharing, copyright enforcement, Uber case study, ride sharing economics, two sided markets, surge pricing, network effects, Ventria Bioscience, GMO rice, stakeholder management, PEST analysis, biotechnology economics, BP Beyond Petroleum, socially responsible investing, SRI, greenwashing, Spotify, Apple iTunes, music industry economics, digital streaming, platform economics, winner takes all markets, technological disruption