Question 1

In Chapter 1, economic thinking is discussed around a model of the "zero-sum game." This implies:
A) that one player's gain is another one's loss
B) that the economy is essentially dynamic and value-adding
C) that the economy is essentially static
D) that the economy can be viewed as a casino for gamblers
E) that the sum of all efforts is often zero for everyone

Accepted Answer

A,C

Question 2

According to Richard Cantillon, entrepreneurs were not tasked with producing - that was the task of landowners and farmers. Rather, entrepreneurial work consisted of:
A) combining resources in a new manner
B) being creative and innovative
C) restoring the balance between supply and demand
D) assessing demand and assuming the risk associated with buying products at a given price and then selling them at a to-be-confirmed price
E) convincing farmers to sell their goods at a cut price to entrepreneurs

Accepted Answer

C,D

Question 3

According to Jean-Baptiste Say, the entrepreneur's task is to shift the factors of production - such as labor, capital and natural resources - "out of an area of lower and into an area of higher productivity and greater yield." In other words:
A) entrepreneurs are highly productive
B) entrepreneurs are generators of value in the economy
C) factors of production are moved from one country to another
D) factors of production tend to increase in value over time
E) the same resources can be more useful and valuable in new combinations and contexts

Accepted Answer

According to Jean-Baptiste Say, the entrepreneur's task is to generate value in the economy by shifting factors of production to new combinations and contexts where they can be more useful and valuable, leading to higher productivity and greater yield. Therefore, options A, C, and D are not correct.

Question 4

Jean-Baptiste Say is the man behind Say's Law, which states that:
A) demand creates supply
B) supply creates its own demand

Accepted Answer

Say's Law states that supply creates its own demand. This means that when businesses produce goods and services, the income they earn from the sales of those goods and services will in turn create demand for other goods and services. In other words, the production and sale of goods and services creates income, which in turn creates purchasing power, which leads to demand for goods and services. This idea is often used to support the concept of a free market economy where businesses and individuals are free to produce and consume as they see fit without government interference.

Question 5

Say and Cantillon launched the notion of subjective utility. This states that:
A) the utility the customer perceives affects the value and thus the price of a good
B) the subjective should not be taken into consideration when setting the price
C) price is a subjective experience
D) production costs define the price of a good

Accepted Answer

The notion of subjective utility introduced by Say and Cantillon suggests that the value and price of a good are determined by the utility perceived by the customer. This means that customer's subjective perception influences the price and value of a good, implying that pricing strategies should take the customer's perception into account. Therefore, option A is the correct choice. Options B, C, and D are incorrect because they either contradict or do not align with the notion of subjective utility.

Question 6

Economic flow or circulation was introduced by French physiocrats, who expressed for the first time that the economy be conceived as:
A) circulating the transformation of natural resources into goods
B) a cycle of increases, prosperity and stagnation
C) if landowners, farmers and buyers purchase independently of one another
D) a small group of people controlling economic development
E) a system of interdependencies, in this case between landowners, farmers and buyers

Accepted Answer

The economic flow or circulation was introduced by French physiocrats as a system of interdependencies, specifically between landowners, farmers, and buyers. They emphasized that these groups of people are interdependent and purchase independently of one another, leading to the circulation of money and goods.

Question 7

The term "homo economicus" - economic man - sums up the fundamental assumption national economy holds of humanity as:
A) an economist who manages a household on a tight budget
B) a person who is interested in finances
C) a male economist
D) a component who rationally reacts to various economic stimuli in the economic system
E) a rational entity whose calculated decisions maximize his or her personal utility

Accepted Answer

The answer of The term "homo economicus" - economic man...

Question 8

The book discusses two opposing systems of thought. One is a Darwinist, evolutionary process with the final solution unknown, while the other is a more Newtonian, mechanistic process with a predetermined end. The first is dynamic and voluntary, while the other is static and deterministic.

Accepted Answer

The statement accurately describes the two opposing systems of thought discussed in the book.

Question 9

Evolutionary development means that something changes gradually from one form to another.

Accepted Answer

Evolutionary development, also known as gradualism, is the idea that species evolve slowly over time through small changes that accumulate gradually. This is in contrast to punctuated equilibrium, which proposes that evolution occurs in short bursts of rapid change followed by long periods of stability.

Question 10

In this context if something is dynamic, it implies that it is developing, in constant movement.

Accepted Answer

If something is dynamic, it means that it is constantly changing and developing, hence in constant movement.

Question 11

Static, in this context, means that something is unchangeable and fixed.

Accepted Answer

Static means something is unchangeable and fixed. It does not change over time or with different circumstances.

Question 12

Determinism implies that every event is predetermined, that events are the inevitable result of pre-ordained conditions.

Accepted Answer

Determinism is the philosophical belief that all events, including human actions, are ultimately determined by causes external to the will. This implies that every event, including human actions, is predetermined and the result of pre-ordained conditions.

Question 13

Voluntarism is the idea that human will and human efforts decide the outcome of various events, in other words the concept of human agency.

Accepted Answer

Voluntarism emphasizes the importance of human will and action in shaping outcomes.

Question 14

Frank Knight differentiated between uncertainty and risk, implying uncertainty - as opposed to risk (such as a game of roulette) - is incalculable and cannot be assessed rationally.

Accepted Answer

Frank Knight's theory of uncertainty distinguishes it from risk, which is quantifiable and can be calculated based on probability. Uncertainty, on the other hand, involves unpredictable and uncontrollable factors and cannot be fully assessed through rational calculations.

Question 15

A central linchpin in the Austrian School is that it views the economic sciences primarily as a theory of:
A) the invisible hand's allocation of resources
B) human decisions/decision-making
C) human actions
D) the manner in which production function handles various choices
E) supply, demand and price mechanisms

Accepted Answer

The Austrian School believes that economics is primarily a theory of human action, meaning that economic outcomes are a result of purposeful choices made by individuals. They argue that this approach emphasizes the subjective preferences of individuals and recognizes the limitations of trying to make macroeconomic predictions based on aggregate data.

Question 16

An essential feature of the Austrian School is its affirmation of subjectivism (opposite: objectivism). This school believes that:
A) entrepreneurs are exceptionally subjective
B) non-entrepreneurs should be viewed as subjects
C) subjectivity is superior to objectivity
D) reality is given to us and essentially impossible to impact
E) the reality we consider relevant is socially constructed
F) humanity's subjective notion of the world must always be taken into consideration
G) reality is continuously being socially constructed

Accepted Answer

The answer of An essential feature of the Austrian School...

Question 17

Certain fundamental features of the Austrian School are how it considers the market economy as:
A) an entrepreneur-driven, dynamic process of search and learn
B) a giant experimental laboratory
C) a dynamic system, the most central aspect of which is the endless stream of knowledge that individuals generate and distribute through their choices and actions
D) a system in which each individual possesses crucial information in order to make a rational decision
E) a system in which price mechanisms control supply and demand
F) a system which is always seeking, striving for and attaining equilibrium

Accepted Answer

The Austrian School views the market as a dynamic, entrepreneur-driven process where individuals generate and distribute knowledge through their actions, and as a giant experimental laboratory.

Question 18

Certain fundamental features of the Austrian School are its thoughts on the human being. In other words:
A) differences between people are more interesting than their similarities
B) a human is only understandable on the basis of his/her subjective perception of a situation
C) humans are bundles of reflexes that respond to simple stimuli
D) humans are biological beings programmed to react in certain manners
E) human beings are social and cultural creatures who constantly interpret their surroundings and ascribe personal meaning to situations and events
F) human beings are able to comprehend decisions after thorough and utility-based analysis
G) human beings react rationally to economic stimuli/incentives

Accepted Answer

The answer of Certain fundamental features of the Austrian School...

Question 19

Certain fundamental features of the Austrian School are that it considers entrepreneurs as:
A) acting based on judgmental decision-making
B) acting without having perfect information about the future
C) obtaining information before making a decision
D) avoiding experiments and uncertainty
E) clever and rational, with the ability to make predictions

Accepted Answer

The Austrian School of economics emphasizes the role of the entrepreneur as someone who acts under conditions of uncertainty and makes judgmental decisions without having perfect information about the future. This perspective highlights the entrepreneurial ability to navigate and make decisions in an unpredictable economic landscape, contrary to the assumption of perfect information or predictability.

Question 20

In his early work, Israel Kirzner identifies "alertness" as the entrepreneur's distinguishing characteristic. In other words, entrepreneurs are alert to gaps in the market, and respond by filling them.

Accepted Answer

Israel Kirzner did indeed identify "alertness" as the distinguishing characteristic of the entrepreneur in his early work.

Quiz 1: The Rise, Fall and Return of the Entrepreneur

In Chapter 1, economic thinking is discussed around a model of the "zero-sum game." This implies:

According to Richard Cantillon, entrepreneurs were not tasked with producing - that was the task of landowners and farmers. Rather, entrepreneurial work consisted of:

According to Jean-Baptiste Say, the entrepreneur's task is to shift the factors of production - such as labor, capital and natural resources - "out of an area of lower and into an area of higher productivity and greater yield." In other words:

Jean-Baptiste Say is the man behind Say's Law, which states that:

Say and Cantillon launched the notion of subjective utility. This states that:

Economic flow or circulation was introduced by French physiocrats, who expressed for the first time that the economy be conceived as:

The term "homo economicus" - economic man - sums up the fundamental assumption national economy holds of humanity as:

The book discusses two opposing systems of thought. One is a Darwinist, evolutionary process with the final solution unknown, while the other is a more Newtonian, mechanistic process with a predetermined end. The first is dynamic and voluntary, while the other is static and deterministic.

Evolutionary development means that something changes gradually from one form to another.

In this context if something is dynamic, it implies that it is developing, in constant movement.

Static, in this context, means that something is unchangeable and fixed.

Determinism implies that every event is predetermined, that events are the inevitable result of pre-ordained conditions.

Voluntarism is the idea that human will and human efforts decide the outcome of various events, in other words the concept of human agency.

Frank Knight differentiated between uncertainty and risk, implying uncertainty - as opposed to risk (such as a game of roulette) - is incalculable and cannot be assessed rationally.

A central linchpin in the Austrian School is that it views the economic sciences primarily as a theory of:

An essential feature of the Austrian School is its affirmation of subjectivism (opposite: objectivism) . This school believes that:

Certain fundamental features of the Austrian School are how it considers the market economy as:

Certain fundamental features of the Austrian School are its thoughts on the human being. In other words:

Certain fundamental features of the Austrian School are that it considers entrepreneurs as:

In his early work, Israel Kirzner identifies "alertness" as the entrepreneur's distinguishing characteristic. In other words, entrepreneurs are alert to gaps in the market, and respond by filling them.