Business Exam #2

CAPITAL

A productive good that has a useful life of more than one year is known as a piece of ________

HUMAN CAPITAL

Investment in the educated brain that has a fifty-year payoff is known as “__________”

INNOVATIONISM

Capitalism is misnamed. It should be called “_________”

CREATIVE DESTRUCTION

Schumpeter said: “The essential fact is capitalism is “____________”

FOR A LIFETIME

“Give a man a fish; feed him for a day. Teach a man to fish and feed him _________”

BETTER WORLD POSSIBLE

“Specialization of labor makes the existing world better but innovation makes a __________”

IDEAS

Complete this quote: “______ change the world.”

INNOVATION

Complete this quote: “_______ is the “Engine of Progress.”

97%

With a new invention, consumers get __% of the total newly created value.

LIGHT A SECOND CANDLE

“It does not diminish the light of the candle to ________.”

KNOWLEDGE/IDEAS

Land, labor and capital suffer from “diminishing marginal returns” but ________ do not.

DISRUPTIVE

Innovations that destroy old jobs and old businesses are known as “_________ technologies”

CONTAINERIZATION….GLOBALIZATION

Truck driver Malcolm McLean’s innovation of “_________” shrank the world and enabled the process of __________.

FAMINE

Norman Borlaug’s innovation of plant dwarfing ended ________ on earth.

PERSONAL COMPUTER

Perhaps the greatest innovation of recent years is the “___________” because it changes the way people communicate, work, play, shop, date, worship, and learn.

BIRTH CONTROL PILL

Name the 1954 medical innovation that produced massive social change _________

RIPPLE

Innovation impacts that take 100 years to work their way thru society are known as the “_______ effects”

MORE FEMALES IN COLLEGE

How did “The Pill” change college enrollments?

LATER MARRIAGE & SMALLER FAMILIES, HIGHER FEMALE EARNINGS & PETS & MORE FAMILIES IN WORKPLACE & FITNESS CLUBS

Name two “non-sexual” social changes caused by “The Pill.”

GROCERY STORE

What US business did the Soviet Premier think a US government set up (fake/fraud)?

LIST TO A CLERK AND THEN WAITED

In an old fashioned “general store”, people gave a _________ in line.

HIGH LABOR COSTS

One problem of the General Store method of selling groceries was the _________________.

BAD DEBT LOSSES

Another problem of the General Store method of selling groceries was the __________

SELF SERVICE

What “innovation” did Saunders use to solve problem #1

PAY CASH

What “innovation” did Saunders use to solve problem #2

FALSE

T or F, Rockefeller, Carnegie, Ford, and Walton got rich by creating a monopoly and charging high prices.

LONGER DAY

Name the non-monetary form of wealth provided by a cheap kerosene lantern.

MANURE

Before automobiles, city streets were filled with massive amounts of ___________.

ENTREPRENEURS

In his article “Old Heros”, Sowell argues: the real heros of society are __________.

EIGHT

“One American manufacturing worker is as productive as ______ Chinese manufacturing workers.”

TIME AND GAS AND ACCIDENT RISK AND CAR WEAR

Name 2 non money costs for MC student to buy gas in Iowa.

SHOULDERS OF GIANTS

“If I have seen further than others, it is because I stood on the ___________________.”

COMPOUND INTEREST…………PURCHASING POWER

Buying on credit is tricky because 1) people do not appreciate the power of ___________ and 2) over time the “______________” of money falls over time.

3.1%

Over the last 100 years inflation in the US has averaged ______% per year.

HIGHEST IN FORTY YEARS

Inflation in 2022 was 8.0% - unusual because it was the ____________.

-$4200

The change in real “real income” of the average family from 2021-24

ZERO-SUM

Economists say that “inflation is a _________ game.”

HIDDEN TAX

Because inflation silently reduces its value; “Inflation is a ________ on savings.”

2.0%

The government’s (FED’s) goal is for society to have _% inflation each year.

MONEY……..STUFF

Inflation occurs when the “pile of new _______” grows faster than the “pile of new ______.”

4.4

If annual money supply grows at 8.5% and GDP grows at 4.1% that year, the inflation rate will be _____%.

0.9

If a worker gets a 5.0% salary increase and inflation was 4.1%, the increase in real wages is _____%.

EXPECTED INFLATION

Adults know there will be inflation each year, so they include the “__________” into all borrowing and savings consideration.

SAVER

If the actual inflation rate is LOWER than expected, the winner is:

BORROWER

If the actual inflation rate is HIGHER than expected, the winner is:

GROSS DOMESTIC PRODUCT

Three-word name of “market value of newly produced final goods and services produced in a nation in one year?”

50% HIGHER

In 2025, China’s GDP was $19 trillion and US GDP was:

$90,000

How large was “nominal US GDP per person in 2025?”

BEST

Although GDP has many, many flaws, it is used because “it is the: ________ number available.”

SLOW, OMITS USED GOODS, OMITS HOMEADE GOODS, BLACK MARKET

Name two ways (flaws) that US GDP is inaccurate

COVID LOCKDOWNS

What factor caused 2020 US GDP to decrease?

SCARY

In 1947, the government switched from “depression” to “recession” because the new word was less _____.

UNEXPECTED EVENTS……….TERRORIST ATTACK

Connell: Recessions are caused by “___________” Example: ________

REALITY

“A recession is an adjustment period when new plans are made to match a new unexpected _________.”

ADULTS………..STRANGERS

Law and Markets are innovative social institutions to allow _________ to deal with _________.

PREVENT

Law can punish a behavior but cannot _________ it.

RULE OF LAW

Rules are known in advance:

RULE OF MAN

Rules are constantly changing:

RULE OF LAW

Rules are equal for all individuals:

RULE OF LAW

Name the great invention that is the foundation of modern commerce.

MAGNA CARTA

Name the 1215 document that placed the first limits on the power of government.

EQUAL PROTECTION OF THE LAW

Name of the legal doctrine that says no one is above the law.

HANDCUFFS, FINES, GUNS, JAIL

In the Us, only government can use force to coerce adults. Name one example

LIFE, LIBERTY, PROPERTY

Name the three things government can take a person using force.

DUE PROCESS OF LAW

Name of the legal doctrine that says government must use fair procedures to take things.

PUBLIC TRIAL

The above legal doctrine says that people must get advance notices of the law and a __________.

THE PEOPLE IN CHAINS……….GOVERNMENT IN CHAINS

“The purpose of a dictator is to keep _________ in chains; the purpose of a constitution is to keep _________.”

NO SEARCHES WITHOUT “PROBABLE CAUSE”

Example of how the constitution restrains government:

A BLINDFOLD

What device/item shows that Lady Justice is impartial?

THE RULES……IMPARTIAL………GO

Courts and umpires are alike- 1) everyone knows _______, 2) everyone knows umpires/judges are always ______, 3) so it is useless to argue with the umpire or ____ to court.

SELF-ENFORCING

Because of the above, the laws are “____________” and thus people do business with strangers.

OUT OF COURT

“Good lawyers keep their clients _________.”

DO TWO THINGS

The Law of Unintended Consequences says “You can never do just one thing; you always ___________.”

COBRA

The other name for the Law of Unintended Consequences is “The _________ Effect.”

MORE DRUNK DRIVING

Name an unintended consequence of cities that prohibit Uber to save taxi driver jobs.

BINGE DRINKING

Name an unintended consequence of America’s twenty-one year old drinking age.

RULE OF LAW, STABLE MONEY, WORKING COURTS

Name three government policies that cause nations to become wealthy.

CURRENT USE………..FUTURE OWNER

The two rights of owners of Private Property are: 1) the right to determine the ___________ of the item, 2) determine the __________ of the item.

THEIR BRAIN AND BODY

The most important, valuable thing most people will ever own is ___________.

PRIVATE PROPERTY

What is the defining characteristic of free market capitalism?

COMMUNITY/PUBLIC PROPERTY

What is the defining characteristic of socialism?

WORK……..STEWARDSHIP……….EXCHANGE….INNOVATION

Private property rights create four important incentives - 1) an incentive to _____, 2) incentive for “________”, 3) incentive to _______, and incentive to engage in ________

CHILDREN AND DOGS

The behavior of _________ is evidence that the desire to own property is a natural characteristic.

WASHES A RENTED CAR

The Stewardship Incentives of property rights are illustrated in the quote, “Nobody _____________”

PROPERTY RIGHTS

Westerners cared for cows but abused bison because of this missing factor:

POOP IN THEIR OWN NEST

The Stewardship Incentives of property rights explains why “Bird will not ______________”

PEE IN PUBLIC POOLS

The incentives to abuse community property is illustrated in the fact that “People _____________”

TRUCK, BARTER, AND EXCHANGE

Adam Smith: “It is a part of human nature to ____________ one thing for another.”

BARGAINS

Adam Smith: “Man is an animal that makes _____________ - no other animal does this”

DOGS……..BONE

Adam Smith: “No one ever saw two ______ make a fair and deliberate exchange of one _______ for another.”

PROMISES BETWEEN ADULTS

“A contract is an exchange of __________.”

BROKEN PROMISES

Courts make people pay for the harm caused by their ____________.

MONEY BACK

Employment contracts exist so newly trained employees cannot leave until a company gets their __________________.

LONG TERM

Contracts exist to reduce risk of trusting strangers and create an incentive to engage in ________ projects.

FAMILY……….TRIBE

In nations where contracts are not enforced fairly, people tend to only do business with ______and ______.

THE MARRIAGE CONTRACT

To reduce the risks associated with sex for females, society invented ____________.

PAID EMPLOYEES

27 million US business have no ________________

UNLIMITED PERSONAL LIABILITY

Sole proprietors and partners have ____________ for all business debts.

HOUSE & LIFE SAVINGS

The legal rule above means the business owner can lose their ___________ to pay business debts.

TRUST, HONOR, PRESTIGE

Being a partner in a partnership is a matter of _______________