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Incentives Matter
Government & the Economy
Economics of Information
Trade & Globalization
100
Why do incentives matter? Name three examples and the incentives that go with them.
Incentives are what primarily move a free market economy. People buys things for some sort of pay in return whether it be a service or a product to serve his or her own desire. Commission - people work harder Price of gas goes up - people drive less Toddlers cry harder - their desires are met
100
Fill in the blank: An externality is the gap between the ___ and the ____ of someone's behaviour
private cost and social cost
100
What is statistical discrimination?
When an individual makes an inference that is defensible based on broad statistical patterns but is likely to be wrong in the specific case.
100
Why is America's standard of living high?
Because we are able to focus on the tasks that we do best and trade for everything else.
200
In the case of the black rhino, why is it better for the government to not become involved with the endangered species? In other words, why is private property so much more successful than communal property?
If the black rhino became privatized, the owner of the rhinos would make sure that the rhino was safe, well-fed, and protected.
200
In regard to externalities, how does the market contribute to the existence of externalities? And how can it respond or deal with them?
The market "fails" by encouraging individuals and firms to cut corners. It can then regulate the affected activity or tax the offending behavior.
200
What is adverse selection?
When sellers have more information than buyers or vice versa.
200
Why is protectionism a bad idea?
We would be denied superior products and forced to do jobs that we're not particularly good at.
300
What are some "perverse incentives"? Name 2 examples.
The perverse incentives are the inadvertent incentives that can be created when we set out to do something completely different. Requiring car seats on planes - more dangerous with the car seat & people began to drive more which caused more emissions -Requiring certain cars to stay off the road once a week - people bought another car that was able to be on the road which was worse for emissions
300
Name two examples of public goods (that weren't mentioned before) that the government provides for us, that would otherwise not be provided by the private sector.
Answers may vary. Possible answers include parks, law enforcement, defense, clean air, museums, etc.
300
What is "The Market for Lemons"?
A paper written by economist George Akerlof about the imbalance of information.
300
What is the African Growth and Opportunity Act?
A law passed in 2000 that allowed Africa's poorest countries to export textiles to the US with little or no tariff.
400
What is the principal-agent problem? Name an example of the principal and an agent of any company.
Corporate America employs people that may not have the best incentives to do a lot of things and are not necessarily in the best interest of the firm. Burger King being the principal and the cashier being the agent. With Burger King, the cashier may pocket the cash so then there would now be a need for a monitor to prevent theft, or there could be a need for a receipt for all purchases.
400
The government encourages competition. Relate this to what we've been studying in class and explain how, by doing so, the government betters our market society.
Possible answers include inprovement in product quality, efficiency, innovation, less waste, lower prices, job creation, higher wages, and benefits for employees.
400
Give an example of statistical discrimination not given in this presentation.
Answers may vary
400
Nike does not use forced labor in its Vietnamese factories. Why are the workers willing to accept a dollar or two a day?
Because its actually better than any other option they have.