Choose one of the arguments countries generally use to justify protection for a particular industry. Describe the argument and any inherent problems with it. Is the argument primarily an economic or a noneconomic one?
What will be an ideal response?
The revenue argument says that for low income nations and developing nations it is an easy tax to administer.
The Labor Argument is an economic argument about jobs, but fails to recognize the importance of productivity rather than nominal wages.
The Infant Industry argument is an economic argument, but is often misapplied. The protection makes firms less likely to be efficient and encourages devoting resources to rent seeking.
The national security argument is a noneconomic argument. The problem is largely deciding which products are critical and the encouragement of rent-seeking.
The cultural protection argument says that an industry is valuable for preserving heritage or culture.
The retaliation argument is an economic argument about how to respond to trade barriers but there is not agreement about the harm caused by foreign trade barriers.
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Which of the following would be included in a year's GDP?
a. Susan cleans the fuel injectors on her car. b. A private individual purchases 100 shares of IBM stock. c. A timber company purchases land in Oregon. d. A man buys an antique desk from his neighbor. e. A college professor purchases a new computer.
The difference between the money rate of interest and the real rate of interest is often called the
a. real balance effect. b. prime interest rate. c. inflationary premium. d. discount rate.
If Mr. Smith thinks the last dollar spent on shirts yields more satisfaction than the last dollar spent on cola, and Smith is a utility-maximizing consumer, he should
a. decrease his spending on cola. b. decrease his spending on cola and decrease his spending on shirts. c. decrease his spending on shirts. d. increase his spending on cola and decrease his spending on shirts.
Online music stores such as Apple's iTunes provide an alternative to buying CDs. The introduction of online music stores has shifted:
A. the demand curve of CDs to the right. B. the supply curve of CDs to the left. C. the demand curve of CDs to the left. D. the supply curve of CDs to the right.