BCOR 1015 Midterm 1 - Sample Answers -1 PDF

Preview

Summary

STUDYGUIDE...

Description

BCOR 1015 Spring Midterm Answer Key Section B In this section you are supposed to pick and answer two questions only. Please note that the questions vary in difficulty and their point allocation is weighted according to how difficult they are. E.g. if you choose question 16 + Question 21 you get a maximum of 14 points (6points + 8 points) The maximum attainable points for this section is 15 points, however this depends on which two questions you to decide to answer and on whether you answer them correctly or not 6 point Questions 1. In AT MOST 100 words, state and explain three key ideas where the “Artificial Scarcity” and Pro-UBI articles are in agreement with one another? Three key ideas from Artificial Scarcity Overlap 1 • •

AS key takeaway 1: Capitalism leads to declining economic prospects for people Pro UBI argument 1: Poverty alleviation, reduces inequalities and reforms inadequate social protection systems

Overlap 2 • •

AS key takeaway 2: When profits are made, the benefits do not trickle down to the consumers and workers but are invested into productive technology just to produce more Pro UBI argument 2: Enables people to flourish in an automated future – who include those seeking to increase workers’ pay and conditions, and their power in the workplace

Overlap 3 • •

AS key takeaway 3: For companies to remain competitive they have to lower wages for workers Pro UBI argument 3: People could reduce their working hours without sacrificing their income.

2. In AT MOST 100 words, summarize the main arguments made in favor of OR against the current level of CEO pay in the United States. Refer to M2D4 notes on Canvas

3. In AT MOST 100 words, using voting as an example, describe three main features and characteristics of rights Sample student response • • • •

Okun's states that rights cannot be bought or sold. In the upcoming presidential election, I cannot purchase a ballot from a friend to increase a candidates votes. Rights are universally distributed. For instance, any American citizen over 18 years old (with exception to felons) can vote in elections despite their gender or ethnicity. Rights cannot serve as incentives. Although I am high achieving/educated, I will not be allowed to cast extra votes in the 2020 election. Our rights are inefficient as they do not allow for economizing. However, they protect liberty, pluralism and humanism.

7 point Questions 4. In AT MOST 120 words, with reference to Hayek’s The Use of Knowledge in Society article, give four reasons why he described the price mechanism as a ‘marvel’? NB: You answers should contain at least three of the following words, “machinery”, “incentive”, “knowledge”, “mechanism”, and “scarcity”, Your Answer: Sample Answer A Four reasons why Hayek described the price mechanism as marvel include: • • • •

Knowledge is dispersed, contextual, and tacit. Information or knowledge is needed to construct "rational economic order". In other words to allow the making of a decision to be based on the dispersed knowledge that people have. With a market approach that involves price signals we would able to create a mechanism that has information that provides a signal to increase or decrease quantity supplied or quantity demanded. If our decision making was decentralized it would create us to have an incentive to share our knowledge with those around us.

Sample Answer B •

The pricing system is the machinery for registering change.

• • •

Our knowledge is dispersed, tacit, and contextual. Pricing communicates all that matters. Since things are scarce, pricing is the mechanism that communicates how valuable a good or service is. Pricing within the market system helps reduce scarcity by incentivizing production and innovation.

From the slides •

•

“We must look at the price system as such a mechanism for communicating information if we want to understand its real function-a function which, of course, it fulfills less perfectly as prices grow more rigid…” “The price system as a kind of machinery for registering change…which enables individual producers to watch merely the movement of a few pointers…in order to adjust their activities to changes of which they may never know more than is reflected in the price movement.”

20. With reference to the readings in the Fairness and Equity module, what four arguments would Friedman make in favor of high CEO compensation? NB: Please make sure your answer aligns with Friedman’s core arguments to the Day 4 readings. Sample Answer A • • • •

Piece-work payment, or a CEO's payment in accordance to product, maintains that a CEO should be able to earn as much as they have contributed to the market. Equalizing differences: the stress, hard work, and other undesirable qualities of the job are fairly compensated with higher pay. Social mobility: a lower level employees ability to rise in status in the long run justifies the higher status and higher educated CEO pay, because the employee can reach that level one day. Risk taking: CEOs willing to risk earning nothing in order to make more money is essential and inspires innovation.

Sample Answer B •

• •

•

Friedman would argue that payment should align with the product of ones work. In other words, if someone decides to dedicate more money and time into their work they deserve higher pay. He would also argue that pay is the way it is to organize an economy most effectively. Allocation of pay is not based on fairness but rather to be the most efficient. Friedman believed that people get what they want through their inheritance and their own initiative. This implies that a CEO of a company deserves high pay because they have worked hard to reach such a status. Lastly, Friedman believed in capitalism and with this comes the fact that in an effective economy their needs to be inequality. Capitalism could not work in an economy where

everyone is on the same level. Friedman believed that wealth disparity is necessary in order to maximize profits. 8 point Question 5. In 120-150 words, describe and explain 3 key ideas that are shared between the Scarcity, Fairness and Liberty modules. NB: I encourage you to use examples in your explanation. Sample Answer A •

Sometimes how you allocate scare or common good resources is not fair for the society, and is only benefiting a certain group of people.

Ex: In the use of space, only companies who have enough money and resources can take rockets and satellites to space. These now new resources can only be used by developed countries and not be third-world countries. •

How a person uses their own property rights,can create an externality to a third unrelated party.

Ex: A person might have enough land and has the right to use their land to have as many farm animals of their choice. The unpleasant smell that these animals can bring, can cause a negative externality to the neighbors. •

How you effectively allocate scarce resources or common goods, could possibly create an externality.

Sample Answer B •

•

•

Scarcity always exists o

In module 1 or scarcity of CEO's in module 2 day 4 or even the scarcity of Atlantic cod in module 3 day 4.

o

Without scarcity we wouldn't need to pick and choose.

Economic Inequalities o

Module one we talked a lot about unemployment and minimum wage workers in the day 4 readings discussing the UBI and how we can help those that don't make enough money

o

In module 2 and 3: equity vs equality and if people deserve to be equal or equitable. We debated whether we agree with Friedman and if people should be paid on their product or if we agreed most with socialism.

Is Government Interference Justified o

Module 1: whether the government should interevene with property rights

o

Module 2 : the governments boundaries debating socialism and capitalism.

o

Module 3 we discussed if the government should intervene in common goods: space and cod

Answer all questions Part A In 50-100 words, which module, out of the three* we have covered so far, most clearly relates to the experiences, readings, and debates engaged issues/ideas in the news article excerpts that you have just read? (1pt) After you have identified the most suitable module, briefly describe the relationships. (5 pts) *In case you have forgotten, we have covered the Scarcity, Fairness and Liberty modules

Part B In 200-250 words, drawing from the news article excerpts, use key concepts from the readings, game days, and class discussions to argue for or against the imposition of a minimum wage. Be sure to identify one significant drawback to your arguments, and why you still think these drawbacks are outweighed by the benefits of your position on the topic. Feel free to draw liberally from arguments made or evidence presented in either of the article excerpts, but also be sure to draw on key concepts from class lectures, discussions, reading and game days. (15 pts) Keep in mind that your essay will be graded according to how well you display: • • • •

Mastery of key concepts defined in readings, discussions, and game days Clarity of thought in response to the prompt, substantiation of arguments, non-contradiction of positions Identification of weaknesses, costs, or challenges to positions chosen Correct grammar, spelling, and punctuation

Sample Student Responses Sample Answer A These articles relate best to the fairness module; relationships can be drawn from Friedman who believes that capitalism motivates people to work hard. This idea is expressed in the minimum wage article when it talks about how a higher minimum wage incentivizes laborers to work harder and stay at their company longer. I support minimum wage. The first minimum wage article discusses the benefits of minimum wage; there is lower employee turnover, lower error rates, better productivity, happier customers, and if people are making more money, then they are more likely to spend that money in the community, facilitating growth in the economy. Cohen talks a lot about the equality of opportunity. Minimum wage makes it so that everybody has a chance to make the same amount of money no matter their race or socioeconomic background. On game day of module two, we looked at how different bakers were paid; they were based off of their productivity. This is a good way to do it but it can be tricky to determine where to begin, it is

easier when there is an established minimum wage to build off of. Haltiwanger describes how he wants to weaken the power of corporations and strengthen the power of the working people. A minimum wage would help this along by giving the working people more money. Despite all of the positives there are some drawbacks to a minimum wage. The second article explains that a higher minimum wage results in automation and therefore loss of jobs. While this is a valid argument, there are studies that show automation adds to social isolation, negative health consequences, and an overall negative effect on society's well being. Because of this, I support an enforced minimum wage. Sample Answer B The module that is shown the most in this article would be Module #3: Fairness and Equality. This is the most suitable module because it is able to show how having a minimum wage increase would be equitable to the workers and to business in the increasing economy of today's age. There should be an increase in minimum wage because it strengthens business and communities. This is extremely important because you are able to eliminate the inequalities of workers who have an under served disadvantage or advantage because of the wage that they are being paid (Cohen). For example, if an employee is payed payed just minimum wage, but the economy or where they live is very high. They do not have the same opportunities as anybody else in there community to be able to buy necessary items for their life. On the contrary, if there were to be an increase in minimum wage, then these same workers are now able to afford the same commodities as those around them. Moreover, if having an increase in minimum wage is creating better productivity and happiness all throughout the employees then we are creating a solution that is benefiting the community (Einstein). By having an increase in minimum wage we are not only thinking about the workers but of the companies that would be affected by this increase in minimum wage. If the minimum wage is increased then the workers who are also consumers, will have more money to spend allowing the economy to grow all together. Furthermore, some authors would say that having an increase in minimum wage would create there to be less jobs for future employees. This would not necessarily be true because if we are able to generate more money toward already existing companies. Then these companies would need more workers to be able to manage their companies in the future. Having an increase in minimum wage would create a cycle in which there is always being money being generated from not only workers but business. Allowing there to be more opportunists for communities all around Sample Answer C These readings most accurately correspond to the ideas in the second module, fairness. Ideas about raising the minimum wage to allow workers to gain a larger share of the revenue their work produces and saving low pay jobs in grocery stores by participating in unions are very much in line with preserving equality. Especially with the second article, where if the workers had lost their jobs to check-out machines, all the revenue generated by the machines would go to those higher up in the company. Implementing a minimum wage is a fantastic way to increase equality, while also providing benefits for the company long term. Allowing a substantial minimum wage gives workers more power to participate in the economy however they chose. It reduces strain on inequality and gives workers a greater potential of climbing the corporate ladder or earning enough to find a better job.

As mentioned in the article, a minimum wage also has a potential of helping the company by giving workers more market power which they might spend back into the company through services or products. This system would create its own demand and allow the company to invest even more money back into its workforce, creating a positive feedback loop. One problem with a minimum wage that someone could argue is that it discourages incentive to work hard as those who don't do as good of a job would still get paid the same amount as a very productive worker. For example, in the cookie game done during the fairness module, the absolute best baker was only being paid slightly more than a baker who did less work with a minimum wage. This also caused lower skilled workers to be laid off as their work wasn't worth paying them minimum wage. While these concerns are a problem, the benefits of a minimum wage are worth the risk, providing benefits to both workers and the company and creating more equality nationwide....