ICAR AICE-JRF/SRF Institutional Economics: practice questions

1 · Institutions and institutional economics · easy

The term 'new institutional economics' was coined by

1. John R. Commons
2. Wesley Clair Mitchell
3. Oliver Williamson
4. Thorstein Veblen

2 · Institutional change · easy

The theory of induced institutional innovation, which holds that changes in relative factor prices and technology create a demand for new institutions, is associated with

1. Vernon Ruttan and Yujiro Hayami
2. Amit Bhaduri and Pranab Bardhan
3. Steven Cheung and D. Gale Johnson
4. Mancur Olson and Garrett Hardin

3 · Institutional change · medium

Which force is NOT emphasised by Hayami and Ruttan as a source of demand for institutional change?

1. A random shift in voters' tastes unrelated to prices
2. New technology that raises the return to securing rights in land
3. Growth of markets that raises the value of output from a resource
4. A change in the relative scarcity and hence the prices of land and labour

4 · Institutional change · easy

North's Nobel prize (1993) was shared with

1. Oliver Williamson
2. Robert Fogel
3. Elinor Ostrom
4. Ronald Coase

5 · Collective action and the group approach · medium

In joint-liability group lending, Ghatak (1999) emphasised that safe borrowers choose to form groups with other safe borrowers. This mechanism is called

1. peer monitoring, which reduces ex post moral hazard
2. social collateral, which raises enforcement
3. dynamic incentives, which reward repayment
4. peer selection, cutting adverse selection

6 · Property rights · easy

Hardin's 'tragedy of the commons' (1968) is, in the terminology of property regimes, more accurately a tragedy of

1. state property
2. open access
3. common property
4. private property

7 · Property rights · medium

Secure land rights are expected to raise farm investment through three channels. Which of the following is NOT one of them?

1. Gains from trade by renting or selling land to more productive users
2. Use of the land as collateral to obtain credit for investment
3. Lower output prices for the farmer's produce
4. Assurance that the farmer will keep the returns from improvements

8 · Tenancy and sharecropping · hard

Output on a plot is Q = 40√L, the output price is 1 and labour's opportunity cost is 2 per unit. A sharecropper keeps half the output and bears all labour costs. How much labour does he apply, and how much would a fixed-rent tenant apply?

1. 25 units as a sharecropper and 50 units as a fixed-rent tenant
2. 100 units as a sharecropper and 400 units as a fixed-rent tenant
3. 25 units as a sharecropper and 100 units as a fixed-rent tenant
4. 50 units as a sharecropper and 100 units as a fixed-rent tenant

9 · Interlinked agrarian markets · medium

Braverman and Stiglitz (1982) showed that a landlord who also lends to his sharecropper

1. can use the loan terms to influence the tenant's effort, partly offsetting the share contract's disincentive
2. will always block technical change because it reduces the tenant's need to borrow
3. cannot affect the tenant's behaviour, because credit and land markets are independent
4. must charge the market interest rate, since any other rate would generally be illegal

10 · Interlinked agrarian markets · medium

Aleem's (1990) study of informal moneylenders in Chambar, Pakistan, found that their high interest rates mainly reflected

1. government interest-rate ceilings that forced lenders to charge above the ceiling
2. high screening, collection and default costs rather than large monopoly profits
3. large monopoly profits, since lenders faced no competition from other lenders
4. the very low cost of lending, which attracted too many lenders to the market