Economics for Management

Question 1

• Society must find a way to decide what jobs to do and who will do them
• Once society has allocated people, it must allocate the goods and services that they produce.
• ‘Must decide who will eat caviar and who will eat Potaoes.’

Answer 1

Greg Mankiw

Question 2

The reason why markets with imperfect information differ from those in which it do… is because actions convey information; market participants
know this, and this affects their behavior.

Answer 2

Joseph Stiglitz

Question 3

Assuming no wars and no increase in population, the economic problem may be solved, or be at least within sight of solution, within a hundred years.
This means that the economic problem is not, if we look into the future, the permanent problem of the human race.

Answer 3

John Maynard Keynes

Question 4

The process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in.

Answer 4

Joseph Schumpeter

Question 5

Competition produces an impersonal compulsion which makes it necessary for numerous individuals to adjust their way of life. In a manner that no deliberate instructions could bring about.

Answer 5

Friedrich Hayek

Question 6

• Neoliberalism is a theory of political economic practices; human well beings can best be advanced by liberating individual entrepreneurial freedoms and skills.
• Characterized by strong private property rights, free markets, and free trade.

Answer 6

David Harvey

Question 7

• The role of the state is to create and preserve an
  institutional framework appropriate to such practices. As well as setting up military, defence, police and legal structures.
• If markets do not exist then they must be created, by state action if necessary.
• State interventions in markets must be kept to a bare minimum because the state cannot possibly possess enough information to second guess market signals
  (prices).

Answer 7

David Harvey

Question 8

• The services rendered by women enter into GDP when they are rendered in exchange for wages, whether in the factory or in the home.
• They do not enter into GDP when they are rendered by mothers and wives to their own families.
• If a man marries his housekeeper or his cook, then GDP is diminished.

Answer 8

Arthur C. Pigou

Question 9

• The economic principle of comparative
  advantage.
• In return for manufactured commodities, a country may decide to import corn. Even if it can be grown with less labour than in the country from which it is imported.

Answer 9

David Ricardo

Question 10

The division of labour is limited by the extent of the market.

Answer 10

Adam Smith

Question 11

The purpose of studying economics is not to acquire a

set of ready made answers to economic questions, but to learn how to avoid being deceived by economists.

Answer 11

Joan Robinson

Question 12

What are the 6 functions of finance?

Answer 12

A Payment system for exchanging goods & services.
A mechanism for the pooling of funds, to undertake large scale enterprise.
A method of transferring economic resources through time/ geographic locations.
A way to manage uncertainty and control risk.
A way to deal with asymmetric-information and incentive problems.
Provides price information which governs decentralised decision making.

Question 13

What are the 3 functions of money?

Answer 13

A medium of exchange
A store of value
A unit of measure

Question 14

What are the three types of money?

Answer 14

Currency (Cash
Central Bank Reserves (electronic between banks)
Bank Deposits (loans created by banks not govt)

Question 15

How does a profit maximising form operate?

Answer 15

Where marginal cost = marginal revenue