Please answer all parts of the following questions. Please number your answers.

1. Economic theory suggests that public goods such as street lighting, national defense, and light houses need to be provided by the government because private sector firms would not be willing and able to do so. Why would private sector firms not be willing and able to offer these public goods?

2. Discuss a situation in which you have witnessed an example of moral hazard.

3. Which county is likely to have a comparative advantage in the production of military equipment such as tanks and missiles: the United States or Chile? Why?