Definition of an Economic System

Analyzing Economic Interactions

A small business owner decides to pay their suppliers within 15 days, even though the legally binding contract allows for 30 days. They do this because it is a widely accepted business practice in their community to pay promptly to maintain a good reputation. Which statement best analyzes the institutional factors influencing the business owner's decision?

Distinguishing Economic Rules

Match each example of a 'rule of the game' that governs economic interactions with the correct institutional category.

The Role of Formal vs. Informal Rules in Economic Behavior

A government aims to foster long-term economic growth and attract investment. Based on the economic understanding of what constitutes the "rules of the game," which of the following policy actions represents the most fundamental and impactful institutional reform?

A country's economic performance is determined solely by its formal institutions, such as its constitution and legal system, because these are the only enforceable 'rules of the game'.

Proposing an Institutional Solution

In a community, a formal law requires all businesses to provide paid sick leave. Separately, there is a widely practiced, though unwritten, local custom for businesses to give employees their birthday off. This year, a specific local bakery decided to expand its menu to include gluten-free options. Which of these represents a strategic business decision made within the existing 'rules of the game', rather than being a rule itself?

Conflicting Economic 'Rules of the Game'

Match each example of a 'rule of the game' that governs economic interactions with the correct institutional category.