BCOR 1015 Midterm Exam Questions and Answers (Scored A)
Question : Hayek said, "Due to the underlying challenge of
knowing the value of any given resource to any given individual at any place and time.......decentralized market exchange facilitated via the price system allocates scarce resources more effectively than any other system of organization"
Correct answer: This statement encapsulates Hayek's view on
the effectiveness of markets in allocating scarce resources due to the dispersed nature of knowledge.
Question : What does Hayek believe regarding knowledge?
Correct answer: - needed for rational economic order
markets provide systematic process that allows us to pool our individual knowledge
price signals allow for coordination even when you do not know the other person
decision making must be decentralized
spontaneous organization is bottom up
Question : What does Hayek mean when he says decisions
should be left with the man on the spot?
Correct answer: Local people and those that live in a certain
area (ex. Uber drivers, local brokers, aka those in the area)
Question : Do experts have enough info to decides what is
needed and what is not when constructing a rational economic order?
Correct answer: - there is a lot to know
experts lack local knowledge
it is dynamic and changing
there are individual preferences and values
Question : What did Hayek argue regarding decisions
making?
Correct answer: Must be decentralized to consider all of the
dispersed knowledge since no one or no community has complete total knowledge
Question : What is the problem of knowledge for Hayek?
Correct answer: Dispersed and bits of incomplete
contradictory knowledge...thus a not just a problem of how to allocate resources but how to utilize knowledge not given to everyone in totality
Question : Arbitrager
Correct answer: Someone who takes advantage of tiny
differences information across markets by simultaneously purchasing a product in one market and selling it in another market. (Uses local knowledge to make profit)
Question : What doubts does Hayek have about central
planning?
Correct answer: "...it is perhaps worth stressing that economic
problems arise always and only in consequence of change"
believes that if they don't consider change important, then those are the same people who stress technological knowledge and development
Question : What does Hayek say about markets, knowledge,
and the price system?
Correct answer: - markets provide a systematic process that
allows us to pool our individual knowledge
business people make decisions using price signals
spontaneous organization is bottom level to top (think of in terms of company)