WGU Global Economics for Managers (C211) Exam Questions

Informal institutions are unwritten social constraints that shape behavior, including norms, customs, values, traditions, and ethics. Option B is correct because ethics represents an informal guide to behavior rather than a formally codified legal requirement. Informal institutions reduce uncertainty by helping people understand what is socially acceptable, trustworthy, or legitimate in a particular society. They matter greatly in global business because managers may comply with formal laws but still fail if they ignore local customs or ethical expectations. Rules and regulations are usually formal when written and enforced by legal authorities. Written laws are clearly formal institutions. Informal institutions are enforced mainly through social approval, reputation, relationships, and cultural expectations rather than courts or government penalties.

In Global Economics for Managers, tariffs are shown to redistribute economic surplus, making option C correct. When a tariff is imposed, consumers lose surplus due to higher prices, while domestic producers gain surplus and the government collects tariff revenue.

However, the gains to producers and government do not fully offset consumer losses, resulting in deadweight loss. Thus, tariffs reduce total economic welfare even though certain groups benefit.

Options A, B, and D are incorrect.

Therefore, option C accurately summarizes the overall economic effect of tariffs.

In Global Economics for Managers, one core proposition of the institution-based view is that when formal constraints are weak or unclear, informal constraints become more influential, making option D the correct illustration.

In option D, although local laws allow firms to bypass certain environmental safety standards, company leaders choose not to do so because of deep ethical values and social responsibility norms. These informal constraints---values, moral commitments, and corporate culture---guide behavior in the absence of strong formal enforcement.

Option A reflects rational economic decision making within clear formal rules. Option B illustrates response to formal policy change. Option C involves avoidance of formal rules rather than reliance on informal constraints.

Thus, option D best demonstrates how informal institutions substitute for weak formal institutions in guiding firm behavior.

In Global Economics for Managers, indifference curves have two key properties: higher curves represent higher utility, and curves do not cross, making options A and C correct.

If curves crossed, preferences would be inconsistent. Higher curves indicate greater satisfaction.

Options B and D violate consumer theory assumptions.

Thus, A and C are correct.

A Nash equilibrium occurs when each participant in a strategic interaction chooses the best available strategy given the strategies chosen by others. Option C is correct because no actor has an incentive to change its strategy unilaterally once the equilibrium is reached. This concept is central to game theory and is especially useful in oligopoly analysis, where firms must consider how rivals will respond to pricing, output, advertising, or product decisions. Option A describes the prisoner's dilemma more specifically, which can produce a Nash equilibrium but is not the definition itself. Option B describes collusion or cartel behavior. Option D describes illegal coordinated action by firms. Managers use Nash equilibrium logic to anticipate competitor behavior and understand why mutually beneficial cooperation can be unstable.

===============