1.How the imposition of a fine for tardy parents at a day care center may have altered the motivations of these parents? The parents would have a reason to be prompt as apposed to an excuse to being late since they have to pay a fine anyway.
2.What is and incentive, and how does it relate to the study of economics?
An incentive is something that encourage one to take a particular action. In economics, incentives are enforced to keep service in circulation.
3.What examples can you think of where moral or social incentives and economic incentives are both present? Are the different incentives complementary or competing? For each of these cases you cite which do you think is stronger incentive?
Charities want to make money to help the unfortunate. Give good to those who contribute, and those who contribute are helping a good cause. They are complimentary and the moral cause is stronger.
4.Describe some ways in which a school teacher might be able to improve the scores of his or her students on a standardized test.
Answer: Give them incentives to want to study to make a good grade.
5.How has a well motivated and seemingly benign government requirement to administer
Answer: An example of another incentive. The people will not do things on their own.
6.Explain how Levitt devised a means of examining student test scores to uncover evidence of cheating teachers? Explain also why Levitt's analysis of the data constituted evidence, and grades of its athletes.
Answer: He watched the scores. It contained evidence because the scores would change only due to the reward teachers would receive from greater scores.
7.Explain what incentives, if any, a university might have to artificially improve the test scores and grades of its athletes?
Answer: The incentive of doing more of a good thing. Them improving the scores wouldn't hurt as much and they would get a reward for it.
8. Describe, in general terms, how sumo wrestling tournaments in Japan are arranged and how the rank of an individual sumo wrestler might change as a result of his performance at one of these tournaments.
9. Describe what it means for a Japanese sumo wrestler to be "on the bubble"
and what incentives this wrestler and his opponent may have to “throw” a wresting match.
10. How did Levitt construct a means of detecting evidence of cheating among Japanese sumo
wrestlers? What evidence does he offer in support of his claim that some Japanese sumo wrestlers
probably “throw” some of their matches?
11. How did Paul Feldman set up his bagel business in the Washington, D.C. area? How did it differ
from most business models?
12.What do the authors of Freakonomics conclude from an analysis of the Paul Feldman’s bagel sales
data? Do these conclusions match with economists’ expectations of human behavior?
13.What window does an analysis of the sales data of Paul Feldman’s bagel business open? Why is this
usually a difficult subject for economists and others to analyze?
14. Based on what can be learned from a study of sales data of Paul Feldman’s bagel business, what
variables affect the incidence of theft in an office setting?
Chapter 2 Q & A
1. Describe, in broad terms, how the Ku Klux Klan came into existence and how its level of popularity
varied over time. In addition, identify specific factors that caused the Klan’s popularity to rise or fall.
2. Explain Stetson Kennedy’s role in the Klan’s ultimate decline in popularity in the South, focusing on
the role the dissemination of what the Klan believed was secret information played in that process.
3. Explain what is meant by the term “information asymmetries” and give examples of information
asymmetries we encounter in everyday life.
4. Explain whether, and if so, how, information asymmetries create a competitive advantage for particular individuals.
5. Explain how such innovations as the Internet have affected the prevalence of information asymmetries.
6. Explain how information asymmetries facilitated the corporate scandals that occurred in the early 2000s.
7. Provide examples that illustrate how the combination of an information asymmetry and fear can lead to inefficient outcomes. Explain how the introduction of the element of fear makes the problem of the information asymmetry even worse.
8. What evidence do the authors offer to support their claim that real estate agents exploit an information asymmetry to their client’s detriment? As more clients become aware of the possibility of such behavior by agents, how might it affect the relationship between the two?
9. Explain how the choice of terms a real estate agent uses to describe a particular property conveys
additional information about the property, and hence the price a potential buyer might be able to successfully offer the seller.
10. This chapter examines how the economic incentives of a real estate agent may differ from those of his or her client.What other subject matter experts are often hired by individuals and businesses? Might they have incentives that differ from those of the clients that hire them?
11. Explain how the information a person has can affect his/her propensity to discriminate. As part of your explanation, distinguish between taste-based discrimination and information-based discrimination.
12. According to the voting data from the Weakest Link, which two groups of people are most likely to be discriminated against in that setting.What type of discrimination is being practiced in each case? Explain.
13. What do the data say about the characteristics of men and women who participate in Internet dating sites relative to the characteristics of the broader population?
14. Assuming many of the people who use Internet dating sites are not being truthful when they describe themselves, what could motivate them to do so, knowing that if they ever actually met a date face-to-face, the truth would likely come out?
Chapter 3
1. What is “conventional wisdom?” What are some ways that “conventional wisdom” comes into being?
2. Explain why challenging the “conventional wisdom” with regard to a sticky social issue may be difficult to do.
3. Considering this chapter’s analysis of the transformation of Listerine from an antiseptic to a cure for halitosis, what can one conclude about the effect of advertising on market demand for a good or service?
4. Explain how the incentives of police departments and the public media gave rise to explanations of the rising crime rate in the 1980s that were totally wrong.
5. Describe, in general terms, the organizational structure of the Black Disciples street gang. How is it similar to the organizational structure of most business?
6. Explain how four years of financial records of the Black Disciples street gang found their way into the hands of a University of Chicago graduate student.
7. How did J.T., a branch leader of a Black Disciples street gang, acquire and maintain a regional monopoly over crack cocaine within the territorial domain of the gang?
8. What are monthly costs incurred by J.T.’s unit of the Black Disciples? Which costs would be considered fixed costs? Which would be considered variable costs?
9. Explain how a “tournament” or “winner take all” labor market works.Why would a street-level drug dealer be willing to accept low pay and poor working conditions?
10. Give your own examples of a “tournament” type of labor market.
11. How do the incentives of the street-level drug salesman differ from those of the gang leader/ franchise owner? Are they both attempting to maximize the profits of the gang? Why or why not?
12. How did the invention of crack cocaine transform the urban street gang?
13. According to the data cited in this chapter, civil rights laws and a shift in the attitudes in the United States regarding race helped to improve the status of black society. How did crack cocaine alter that progress?
14. Based on the examples in this chapter, what does the invention of better and cheaper production methods do to the price and sales of a good or service?
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