Numerical example

D) Please look at the following table where numbers refer to productivity (number of items produced by one labour hour, e.g. 15 means that Germany is able to produce 15 pieces of cars in one hour).

Table: Labour productivity in Germany and Hungary

	Cars	Cloth
Germany
Hungary

Q1: Which of the two countries has an absolute advantage in the production of cars?

(a) Germany

Q2: Which of the two countries has an absolute advantage in the production of cloth?

(a) Germany

Q3: Based on the concept of absolute advantage, is there a chance for mutually beneficial trade between the two nations?

(a) No, since Germany is the best performing country in the production of both products.

Q4: Which of the two countries has a comparative advantage in the production of cloth?

(b) Hungary

Q5: Which of the two countries has a comparative advantage in the production of cars?

(a) Germany

Q6: Based on the concept of comparative advantage, is there a chance for trade between the two nations?

(c) Yes, since Germany has a larger absolute advantage in the production of cars, while Hungary has a smaller absolute disadvantage in the production of cloth.

Exercises 2

A)

Q1: Decide which of the following statements is correct. (p. 77.)

(b) Economists regard markets as self-regulating mechanisms, where politics does not have a say at all.

Q2: According to… (p. 77-78)

(a) IPE, world economy has a significant influence on states’ power, values and autonomy.

Q3: Decide, which of the following statements is correct. (p. 78)

(a) States consider relative gains much more relevant than absolute gains.

Q4: Zero-sum game means that … (p. 78)

(d) one party’s gain necessarily means the loss of another.

Q5: Interdependence … (p. 80)

(c) creates vulnerability.

Q6: States regard … (p. 80)

(a) national autonomy as important.

Q7: Nowadays, it is evident… (p. 81)

(c) that powerful market forces can cross political boundaries.

Q8: International economic relations…. (p. 82)

(b) are never purely economic.

Exercises 3

(i) Public goods

A)

Q1: Why is a lighthouse said to be a public good? (p. 82.)

(b) Because no one can be excluded from its usage

Q2: What do we mean by free-riding? (p. 82.)

(a) In case of public goods, people seem to be reluctant to contribute to the costs of provision.

Q3: Why is it generally the case that public goods are underprovided? (p. 82.)

(c) People do not have an incentive to provide public goods because they are apparently free.

(ii) International institutions and international regimes

B) The number of right answers can be anything from zero to four.

Q1: Which country or countries took the leader role(s) after World War II?

(b) USA

Q2: By liberal international economy, the allied Western nations meant (p. 86.)

(b) free trade

(c) cooperation among themselves

(d) open markets

Q3: What determines the content of an international regime? (p. 87.)

(a) economic factors

(c) political factors

(d) technological factors

Q4: To which concept does the following statement refer: “sets of implicit or explicit principles, norms, rules, and decision-making procedures around which actors’ expectations converge in a given area of international relations” (p. 83.)

(c) international regimes

Q5: According to the so-called regime theory, why are international regimes necessary features of world economy? (p. 84.)

(a) International regimes can preserve and stabilise international economy.

(c) International regimes can minimise transaction costs.

(d) International regimes can reduce uncertainty in world economy.

Q6: What is meant by “stagflation” (http://www.investopedia.com/terms/s/stagflation.asp)? (p. 84.)

(b) stagnation plus inflation

(c) low or zero economic growth plus inflation

Q7: How can the term “informal rules” be best described?

(a) spontaneous, without conscious design

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