The One Lesson of Business

Question 1

Wealth is created when

Answer 1

assets move from lower to higher valued assets

Question 2

An individual’s value for a good or service is measured as

Answer 2

the amount of money he or she is willing to pay for it.

Question 3

To value a good means that

Answer 3

you want it and can pay for it.

Question 4

The biggest advantage of capitalism

Answer 4

is that it creates wealth by letting people follow their self-interests.

Question 5

Voluntary transactions create

Answer 5

wealth.

Question 6

Seller surplus is

Answer 6

the difference between the sellers value and the price

Question 7

Buyers surplus

Answer 7

the buyer’s value minus the price

Question 8

Zero-sum fallacy is

Answer 8

when one party makes money and another loses.

Question 9

Governments play a critical role in the wealth-creating process by

Answer 9

enforcing property rights and contracts

Question 10

The absence of property rights

Answer 10

contributes to poverty.

Question 11

Without private property and contract enforcement

Answer 11

wealth-creating transactions are less likely to occur.

Question 12

Secure property rights are associated with measures of

Answer 12

environmental quality and human well-being.

Question 13

Economics can be used by businesses

Answer 13

to spot money-making opportunities.

Question 14

Efficient economies are when

Answer 14

all assets are employed in their highest-value uses.

Question 15

A good policy facilitates

Answer 15

the movement of assets to higher-valued uses; and a bad policy prevents assets from moving or to lower-valued uses.

Question 16

Determining policy requires

Answer 16

deep analysis of its effects

Question 17

Making money principle is to

Answer 17

find an asset employed in lower value use, buy it, and then sell to someone who places higher value on it.

Question 18

The one lesson in business is the art of

Answer 18

identifying assets in low valued uses and moving them to high valued uses and making profit

Question 19

Taxes are

Answer 19

revenue collected by the government.

Question 20

Subsidies are

Answer 20

opposite of taxes and encourage low value consumers to buy or high value sellers to sell, it destroys wealth by moving assets in the wrong direction.

Question 21

Price Controls is

Answer 21

a regulation that allows trade only at certain prices.

Question 22

Companies can be thought of

Answer 22

as collections of transactions, buying raw materials like capital and labor to selling finished goods and services.

Question 23

Organizations impose taxes, subsidies, and price controls within their companies that

Answer 23

either deter profitable transactions or encourage unprofitable ones.

Question 24

Voluntary transactions create wealth by

Answer 24

moving assets from lower to higher valued uses.

Question 25

Anything that impedes the movement of assets to higher-valued uses

Answer 25

destroys wealth.

Question 26

The art of business consists of

Answer 26

finding assets in low valued use and devising ways to profitably move them to higher valued ones.

Question 27

A company can be thought of

Answer 27

as a series of transactions.