Exercises 3. Q1: Why is a lighthouse said to be a public good?

(i) Public goods

A)

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

(a) Because it enhances the welfare of the public

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

(c) Because the lighthouse is good for the public.

(d) Because it costs nothing to the society.

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.

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

(c) In case of public goods, people seem to happily contribute to the costs of provision.

(d) In case of market goods, people seem to happily contribute to the costs of provision.

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

(a) People do have an incentive to provide public goods because they are apparently free.

(b) People try to find the proper incentives to provide public goods because they are practically not free.

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

(d) People are eager to find the proper incentives to provide public goods because they are extremely expensive in reality.

(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?

(a) USA and Japan

(b) USA

(c) the OECD countries

(d) Germany and Great Britain

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

(a) protective measures

(b) free trade

(c) cooperation among themselves

(d) open markets

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

(a) economic factors

(b) gender 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.)

(a) public goods

(b) the International Monetary Fund

(c) international regimes

(d) international economy

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.

(b) International regimes are the creatures of emerging markets.

(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.)

(a) relatively high level of economic growth plus deflation

(b) stagnation plus inflation

(c) low or zero economic growth plus inflation

(d) stagnation plus irritation

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

(a) spontaneous, without conscious design

(b) not valid or not taken seriously

(c) artificial

(d) can be changed easily

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