Module 4

Question 1

What brings prior knowledge of markets and customer problems?
a. Education
b. Experience
c. Networks
d. Entrepreneurial alertness
e. All of the above

Answer 1

a.b.d.

Question 2

What are some sources of new ideas (5)?

Answer 2

1. Consumers
2. Existing products and services
3. Distribution channels
4. Federal government
5. Research and development

Question 3

The inability of a system of market institutions to incentivize desirable activities or to avoid undesirable ones.

Answer 3

Market failure

Question 4

Does market failure exist permanently.

Answer 4

No.

Question 5

Strategies for entrepreneurs:
1. Define and enforce property rights, rivalry and excludability in goods
2. Internalize externalities
3. Develop informational structures
4. Transform government intervention
5. Break monopoly power

a. Spillover effects / side effects of one party’s activity on another party for which no compensation is provided.
b. Sustainable political entrepreneurs aim to change taxes, subsidies or other government incentive structures to increase the integration of social, environmental and economic goals at the global level and to enable realization of more win-win conditions that maximize social welfare in the long-term whilst at the same time enabling a sufficient level of private benefit.
c. Lack of full information results in inefficiencies and opportunities to capture economic value / the informational entrepreneur develops new market information systems that make markets more efficient.
d. One producer is most efficient due to economies of scale relative to size of market.
e. Authority to determine how a resource or asset is used / markets work effectively because they provide excludability / one of the root causes of environmental degradation (tragedy of the commons)

Answer 5

1e
2a
3c
4b
5d

Question 6

True or false. Excludability means the owners of an asset encourages others to use it.

Answer 6

False. They can prevent others from using it.

Question 7

A product or asset whose use diminishes or precludes another person’s ability to use that same product or asset.

a. Nonrival good
b. Rivalrous good

Answer 7

b.

Question 8

A product or asset that can be used by many repeatedly without diminishing the quality of the product or asset.

a. Nonrival good
b. Rivalrous good

Answer 8

a.

Question 9

True or false. Goods that are non-excludable and rivalrous (tragedy of commons) are often referred to as common goods.

Answer 9

True.

Question 10

What are the problems of non-excludability + rivalry?

1. Free-ride problem: non-excludability engenders overuse.
2. Supplu problem: decreased motivation to produce goods.
3. Monetary problem: decrease of funds to support the rivalry.
4. All of the above

Answer 10

1.2.

Question 11

True or false. Positive externality means the spillover effects are detrimental to affected parties.

Answer 11

False.

Question 12

What is the process of eliminating externalities from market systems?

Answer 12

Internalizing externalities

Question 13

1. Make those who create negative externalities pay those costs.
2. Figure out new ways to capture the value of the external benefits

a. Internalizing positive externalities.
b. Internalizing negative externalities.

Answer 13

1b
2a

Question 14

What strategy refers to the Pigouvian taxes
1. Define and enforce property rights, rivalry and excludability in goods
2. Internalize externalities
3. Develop informational structures
4. Transform government intervention
5. Break monopoly power

Answer 14

2.
Pigouvian taxes and transaction cost: negative externalities of fossil fuel use - damage to health and the environment.

Question 15

What cause friction in the market?
a. Search costs
b. Negociation costs
c. Regulation costs
d. Contracting costs
e. Enforcement costs
f. All of the above

Answer 15

a.b.d.e.

Question 16

Achieved through green/social certification and labeling programs.
1. Define and enforce property rights, rivalry and excludability in goods
2. Internalize externalities
3. Develop informational structures
4. Transform government intervention
5. Break monopoly power

Answer 16

3.
Gobal standards, green building, organic food

Question 17

One key to the success for international sustainability entrepreneurs may be to create systems that provide valid information to customers regarding the attributes of a product of service.

1. Define and enforce property rights, rivalry and excludability in goods
2. Internalize externalities
3. Develop informational structures
4. Transform government intervention
5. Break monopoly power

Answer 17

3.

Question 18

1. Natural monopoly
2. Statutory monopoly

a. One producer is most efficient due to economies of scale relative to size of market.
b. Monopoly is supported by law.

Answer 18

1a
2b

Question 19

What effects does monopoly power have on the environment, relative to a perfectly competitive outcome?

Answer 19

• Lower equilibrium quantity may be better for the environment in polluting industries.
• Reduced innovation could decrease efficiency and technological progress and thereby increase environmental degradation.

Question 20

Methods of generating new ideas.
1. Brainstorming
2. Parameter analysis (morphological box)
3. Reverse brainstorming
4. Brainwriting
5. Checklist method
6. Free association
7. Forced relationships

a. Developing a new idea through a chain of word associations.
b. Form of written brainstorming.
c. Define and generalize the problem, search alternative solutions and evaluate the new combinations
d. Though most ideas generated have no basis for further development, sometimes a good idea emerges
e. A group method for obtaining new ideas focusing on the negative
f. Developing a new idea by looking at product/word combinations
g. Developing a new idea through a list of related issues

Answer 20

1d
2c
3e
4b
5g
6a
7f