Econ 305 Exam 1 Study Guide
You should be able to explain why free trade maximizes gains from trade as well as be
able to identify who has a comparative advantage in an economy producing two goods such as
in the Richlander/Poorlander scenario.
Ethical Decision Making
In Real Life
Results from Last Weeks
Dictator Game Results
Evaluating the Stakes
(1) ECONOMIC STAKES
(2) REPUTATIONAL STAKES
(3) ORGANIZATIONAL STAKES
(4) LONG-TERM STRATEGIC STAKES
At the end of Case A, would you
have chosen to develop
If you are a yes
Is there a $ cost value at
Bloombergs Initiatives A.
There is an obesity epidemic in New York City and
elsewhere in the country.
Sugary drink consumption and inactivity contribute to the
A reduction in obesity rates is the efficient outcome.
Midterm Exam Answers and Grading Scheme
Many of the multiple choice questions had numerous answers, and we gave partial credit for
correct answers. The exact scheme for assigning partial credit depended on the number of
Moral Hazard and Insurance
Thus far, we have assumed that buyers and
sellers traded goods under the condition that both
knew completely the qualities of the good being
You and I trade a
Franciscos Money Speech
Francisco Confronts Rearden
Money rests on the axiom that every
man is the owner of his mind and his
effort. . . . Money permits you to obtain
for your goods and your labor that
which they are worth to the men who
Bias in the Evaluation of
Conflict of Interest Policies
What is a Conflict of Interest?
Rationalists would point out that people
make decisions based on some sort of
criteria that they set out in advance.
Behavioralists: That is not true. Emotions lead
Tragedy of the Commons
Tragedy of the Commons
Each of you is a farmer, and you must decide whether
to irrigate your land or not.
The water flows from the
Today and Next Week
Externalities Theory and Definitions
Externalities in Practice
What is an Externality?
An action has an externality if there are
social costs or social benefits to my action
in addition to t
1. Explain why free trade maximizes gains from trade and be able to identify who has a comparative advantage in an economy producing two goods.
a. Free trade maximizes gains from trade because it allows for the voluntary trading of goods among
Is my decision one that I can repeat every
time this issue comes up? If not, why is
this case special?
Thinking about Hold Up
Company A makes a product for Company B. Company
A incurs $10M in up-front fixed costs with no contract