What are the arguments in favor of trade restrictions, and what are the counterarguments? According to most economists, do any of these arguments really justify trade restrictions? Explain
Arguments mentioned in the text include the jobs argument, the national security argument, the infant industry argument, the unfair competition argument, and the protection-as-a-bargaining-chip argument. These arguments and counter-arguments are outlined in section 9-3 of the text. Most economists would dismiss the jobs argument, the infant industry argument, and the unfair competition argument on strictly economic grounds. The bargaining-chip argument carries high risks of economic harm if the threat doesn't work. The national-security argument balances economic loss from trade restriction against the benefit of long-term national survival, and is probably the argument that economists would most likely buy if it were clear that the industry being protected was clearly crucial to national security.
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When external costs are present and the government imposes a tax equal to the marginal external cost, then
A) efficiency can be achieved. B) transaction costs will be high. C) the marginal benefit of the external cost will fall. D) property rights must have already been established.
The government's budget deficit is best represented by which of the following equations?
A) Budget deficit = Government purchases of goods and services + Transfer payments + Interest payments on existing debt + Seigniorage B) Budget deficit = Government purchases of goods and services + Transfer payments + Tax revenue+ Newly issued government bonds C) Budget deficit = Government purchases of goods and services + Interest payments on existing debt + Newly issued government bonds + Seigniorage + Transfer payments - Tax revenue D) Budget deficit = Government purchases of goods and services + Transfer payments - Tax revenue + Interest payments on existing debt
The manager of Fatty Foods is thinking about retiring. He has two options: to leave his stores as a company stores, to be managed by a salaried manager, or to sell some of them as franchises. He however has no way of monitoring the salaried managers' activities. What would be his best bet?
a. Let the stores stay company stores b. Sell them off as franchises c. Shut down the business completely d. Never retire
An example of contractionary fiscal policy is
A) an increase in government expenditures, or an increase in taxes, or both. B) a decrease in government expenditures, or a decrease in taxes, or both. C) an increase in government expenditures, or a decrease in taxes, or both. D) a decrease in government expenditures, or an increase in taxes, or both. E) increasing government expenditures while holding taxes constant.