FIN 320F Exam 1 Study Set with comprehensive Questions and
Answers
Incentives✔️✔️Humans are evaluative: they evaluate potential courses of action by considering
the positive and negative consequences of their actions
Humans are Imperfectly Maximizing✔️✔️We play many different roles in our daily lives: student,
mentor, husband, wife, significant other, worker, supervisor, family member, friend, citizen,
customer, and more! In these different roles we make many decisions and seek to maximize our
overall welfare resulting from these cumulative decisions
Limited Resources: Time. Wealth, information, knowledge,
Positive incentives✔️✔️___ motivate humans to take a course of action
Wealth, Family, Prestige, Self-Worth and Spirituality
Negative incentives✔️✔️___ motivate humans to avoid taking a course of action
Legal Sanctions. Loss of Money, Social Sanctions, Physical Sanctions
Imperfections✔️✔️Humans, as best they can, seek to maximize their welfare; however, humans
lack the ability to get, absorb, or understand all information
Resources✔️✔️Physical or intangible assets that can be used to accomplish a goal. ___ are limited
and decision makers are also constrained in their decision making by the resources available
Resourcefulness✔️✔️Despite their limits humans operate in creative ways to expand their set of
positive incentives and minimize the impact of negative incentives
,Confirmation Bias✔️✔️The tendency to process information by looking for, or interpreting
information that is consistent with one's existing beliefs
Economic activity✔️✔️The production, distribution and consumption of economic assets
Economic assets✔️✔️Assets functioning as stores of value and over which ownership rights are
enforced by institutional units, individually or collectively, and from which economic benefits
may be derived by their owners by holding them, or using them, over a period of time
Property rights✔️✔️The right to control an asset. This control includes how the property should be
used, how the benefits from this use are distributed, and the ability to dispose of the asset.
Efficiency✔️✔️Getting the most output from scarce productive resources
Fairness✔️✔️The concept that all humans have value and should be treated equally and with
respect. This implies a decent standard of living through the adequate access to economic assets
Socialism✔️✔️A governmental system with a collective or governmental control of property
rights.
Capitalism✔️✔️A market economy where individuals control property rights, especially the right
to control assets used to produce society's economic assets
Corruption✔️✔️Dishonest or illegal activity by persons in authority, especially political leaders,
government administrators, judicial officials and police
Mixed Economy✔️✔️Most countries do not have purely capitalist or socialistic societies but rather
have a ___ in which government and markets interact
, Today the U.S. and other major economies are neither pure socialist or pure market, but rather
___ where private property rights are respected and businesses have substantial economic
freedom to operate, but where governments do intervene in economic activity in order to achieve
social goals.
Three Key Roles of the Government✔️✔️Enhance the welfare of its citizens.
- Governments should also provide a framework within which economic activity can occur, such
as effective transportation, communication, and education.
Limit opportunistic behavior.
-Governments are also expected to limit opportunistic behavior in market transactions. Societies
have found that economic activity can be exploited through monopolies, unsafe products,
deceptive marketing, child labor, and more. While market behavior is constrained by competition
and consumer choice, consumers may lack information on their choices or even the existence of
choice itself.
Modify or Replace Markets
- Governments may actually take on economic activity. Many people believe that markets may
fail, or they think markets may produce bad results that harm individuals and localities, thus
producing unfair results. In these cases, the government may step in and allocate resources in a
fair manner. The entire debate over health care in the U.S. involves this fundamental issue of
fairness. Given the increasing level of economic inequality, this is a serious issue to consider.
Ethics✔️✔️___ are the norms of behavior that guide human actions, in effect how humans treat
each other
Nonprofit organizations✔️✔️___ in the U.S, are groups that are tax-exempt as "public charities"
because they are formed to provide "public benefit."
Non-governmental organization (NGO)✔️✔️___ which are private sector, voluntary (and usually
non-profit and non-sectarian) organization that contributes to, or participates in, cooperative
projects, education, training or other humanitarian, progressive, or watchdog activities.
Answers
Incentives✔️✔️Humans are evaluative: they evaluate potential courses of action by considering
the positive and negative consequences of their actions
Humans are Imperfectly Maximizing✔️✔️We play many different roles in our daily lives: student,
mentor, husband, wife, significant other, worker, supervisor, family member, friend, citizen,
customer, and more! In these different roles we make many decisions and seek to maximize our
overall welfare resulting from these cumulative decisions
Limited Resources: Time. Wealth, information, knowledge,
Positive incentives✔️✔️___ motivate humans to take a course of action
Wealth, Family, Prestige, Self-Worth and Spirituality
Negative incentives✔️✔️___ motivate humans to avoid taking a course of action
Legal Sanctions. Loss of Money, Social Sanctions, Physical Sanctions
Imperfections✔️✔️Humans, as best they can, seek to maximize their welfare; however, humans
lack the ability to get, absorb, or understand all information
Resources✔️✔️Physical or intangible assets that can be used to accomplish a goal. ___ are limited
and decision makers are also constrained in their decision making by the resources available
Resourcefulness✔️✔️Despite their limits humans operate in creative ways to expand their set of
positive incentives and minimize the impact of negative incentives
,Confirmation Bias✔️✔️The tendency to process information by looking for, or interpreting
information that is consistent with one's existing beliefs
Economic activity✔️✔️The production, distribution and consumption of economic assets
Economic assets✔️✔️Assets functioning as stores of value and over which ownership rights are
enforced by institutional units, individually or collectively, and from which economic benefits
may be derived by their owners by holding them, or using them, over a period of time
Property rights✔️✔️The right to control an asset. This control includes how the property should be
used, how the benefits from this use are distributed, and the ability to dispose of the asset.
Efficiency✔️✔️Getting the most output from scarce productive resources
Fairness✔️✔️The concept that all humans have value and should be treated equally and with
respect. This implies a decent standard of living through the adequate access to economic assets
Socialism✔️✔️A governmental system with a collective or governmental control of property
rights.
Capitalism✔️✔️A market economy where individuals control property rights, especially the right
to control assets used to produce society's economic assets
Corruption✔️✔️Dishonest or illegal activity by persons in authority, especially political leaders,
government administrators, judicial officials and police
Mixed Economy✔️✔️Most countries do not have purely capitalist or socialistic societies but rather
have a ___ in which government and markets interact
, Today the U.S. and other major economies are neither pure socialist or pure market, but rather
___ where private property rights are respected and businesses have substantial economic
freedom to operate, but where governments do intervene in economic activity in order to achieve
social goals.
Three Key Roles of the Government✔️✔️Enhance the welfare of its citizens.
- Governments should also provide a framework within which economic activity can occur, such
as effective transportation, communication, and education.
Limit opportunistic behavior.
-Governments are also expected to limit opportunistic behavior in market transactions. Societies
have found that economic activity can be exploited through monopolies, unsafe products,
deceptive marketing, child labor, and more. While market behavior is constrained by competition
and consumer choice, consumers may lack information on their choices or even the existence of
choice itself.
Modify or Replace Markets
- Governments may actually take on economic activity. Many people believe that markets may
fail, or they think markets may produce bad results that harm individuals and localities, thus
producing unfair results. In these cases, the government may step in and allocate resources in a
fair manner. The entire debate over health care in the U.S. involves this fundamental issue of
fairness. Given the increasing level of economic inequality, this is a serious issue to consider.
Ethics✔️✔️___ are the norms of behavior that guide human actions, in effect how humans treat
each other
Nonprofit organizations✔️✔️___ in the U.S, are groups that are tax-exempt as "public charities"
because they are formed to provide "public benefit."
Non-governmental organization (NGO)✔️✔️___ which are private sector, voluntary (and usually
non-profit and non-sectarian) organization that contributes to, or participates in, cooperative
projects, education, training or other humanitarian, progressive, or watchdog activities.
