Since the "winners" from free trade can more than compensate the "losers" why does it matter if wages and employment fall when a country engages in free trade?
What will be an ideal response?
While it is correct that the "winners" from free trade can more than compensate the "losers," this rarely actually happens. First, the government might not be able to effectively carry out such wealth transfers. Second, it is often difficult to pinpoint exactly who the winners are and how much each gained, and who the losers are and how much each lost. Many people enjoy small benefits from trade but a few people suffer very heavy losses.
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Price elasticity of demand is defined as
A) the change in price divided by the change in quantity demanded. B) the change in quantity demanded divided by the change in price. C) the percentage change in price divided by the percentage change in quantity demanded. D) the percentage change in quantity demanded divided by the percentage change in price. E) the quantity demanded divided by the price.
Suppose that everybody pays the same price for auto insurance. What should happen to the price of insurance if the law changes from a system where there is mandatory auto insurance to one where there is voluntary auto insurance?
What will be an ideal response?
The United States has a comparative advantage and specialize in the production of airplanes. Compared to the situation with no trade, which of the following will occur?
A) More airplanes will be produced in the United States. B) There will be no change in the price of airplanes in the United States. C) The world price of airplanes will increase. D) The quantity of airplanes demanded in the United States will increase.
Buffalo Wild Wings CEO Sally Smith decided to spend more than $200 million on restaurant renovations in an attempt to attract more lunch customers and more families
Like CEOs of other monopolistically competitive firms, Smith knew that without innovating A) her firm would become perfectly competitive. B) her firm had no chance of remaining in business. C) her firm would eventually earn an accounting profit of zero. D) her firm's profits would eventually be competed away by other firms.