The Case for Free Trade Is Based on the

question 51

Multiple Choice

The case for free trade is based on the

• A) theory of balanced growth.
• B) theory of absolute advantage.
• C) argument for a diversified economy.
• D) theory of comparative advantage.

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Definitions:

Government Intervention

Actions taken by a government to affect the economy, which can include regulation, subsidies, tariffs, and other mechanisms.

Externalities

Economic side effects or consequences of an industrial or commercial activity that affect other parties without being reflected in the costs of the goods or services involved.

Coase Theorem

A principle that asserts if property rights are clearly defined and transaction costs are low, private negotiations will lead to the efficient resolution of disputes over the allocation of resources.

Transaction Costs

The costs that parties incur during the process of agreeing to and following through on a bargain.