The textbook refers to the following quotation from a Federal Reserve publication: "Trade is a win-win situation for all countries that participate." But many firms and workers oppose free-trade policies and protests against globalization have become a
regular occurrence at meetings of the World Trade Organization. If trade is a "win-win" situation, why is there strong opposition to free trade and globalization?
What will be an ideal response?
Free trade between any two countries can be shown to make both countries better off by increasing the amount of goods and services available to consumers. Free trade gives incentives to countries to produce goods and services for which they have a comparative advantage. This allows for an efficient allocation of scarce resources. But devoting more resources to the production of one product means fewer resources are devoted to producing another product. Firms that produce these products experience a loss in revenue and profits and some workers are likely to lose their jobs. Even if other opportunities are available for workers they often require acquiring new skills and movement to another area of the country. There are net gains from free trade—gains exceed losses—but it is not surprising that those who are harmed oppose free trade policies.
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If a landlord checks a renter's credit history before renting the apartment, this is an example of ________.
A) self-revelation B) certification C) screening D) the lemons market
All of the following are true regarding moral hazard except which one?
A) It arises when parties to a transaction have conflicting objectives and the supervising parties cannot monitor the other parties. B) It typically occurs after participants have already entered into a contract or agreement. C) It is a situation in which individuals make hidden actions that benefit them at the expense of the other parties. D) Situations of moral hazard tend to be rare occurrences.
Why might policymakers attempts to stabilize the economy do more harm than good?
The accompanying table shows a pizzeria's fixed cost and variable cost at different levels of output. Pizzas sell for $20 each. Number of Pizzas Per DayFixed Cost ($/Day)Variable Cost ($/Day)050002550015050500250755004501005008501255001,650 When the pizzeria makes 50 pizzas a day, its average variable cost is ________.
A. $20 B. $10 C. $5 D. $15