Question 1

What are the three major forms of governance and what are their dimensions?

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Question 2

Explain the significance of economic institutions in international trade.

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Question 3

What is the marginal cost rule of specialization?

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Question 4

Megan, an analyst in Ronald's team called in sick on a day when 4 projects were due for completion.Ronald divided Megan's work between the remaining six team-members.Which form of governance is being used here?

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In this scenario, Ronald, who is likely the team leader or manager, exercises his authority to divide Megan's work among the remaining team members. This reflects a hierarchical form of governance, which is commonly found in organizations with formalized structures and clearly defined roles and responsibilities.

Question 5

How does the discovery of new resources affect trade patterns around the world?

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Question 6

What are the conditions that an exchange must satisfy in order to make two individuals participate in it?

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Question 7

Transaction costs reduce the benefit accruing to the parties involved in an exchange.Explain why.

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Question 8

Why do economists show little interest in how the benefits from an exchange are shared between the two parties?

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Question 9

What is a production set?

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Question 10

What is the marginal cost of producing one unit of A for an economy that produces only two goods, A and B.

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Question 11

Identify some of the possible transactions costs involved in an exchange of a used car between two individuals.

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Question 12

What is economic value of an exchange?

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Question 13

Mention the factors which have helped South Africa's electricity supplier, Eskom, to reduce transaction costs and distribute electricity cheaply?

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Question 14

Explain how the development of telecommunications has made cities like Bangalore and Omaha important locations for the development of service trade?

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Question 15

What is a seller's opportunity cost?

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Question 16

Hoe does etiquette help in transaction of goods between two parties?

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Question 17

Prices play a smaller role in _____, in contrast to other modes of governance like _____ and _____.

Accepted Answer

In hierarchies, such as within organizations or bureaucracies, decisions about resource allocation and activities are often made based on authority or rules rather than prices. In contrast, markets rely heavily on prices to guide decisions, and contracts, while they can specify prices, are also a form of governance that can rely on legal or negotiated terms beyond just price mechanisms.

Question 18

Which of the following is an example of market governance?

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Question 19

What causes an economy to produce a level of output which lies inside the production set?

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Question 20

Why should an economy specialize and trade according to its marginal cost advantage or comparative advantage?

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Quiz 2: Transactions and Institutions: the Building Blocks