A Bill Pending Before the Legislature in the Tiny Island

question 239

Multiple Choice

A bill pending before the Legislature in the tiny island nation of WooHoo would prohibit private companies from selling canoe insurance and make the state the single payer of claims for canoe accidents. Private insurance companies that have made above normal profits have spent large sums of money trying to prevent the legislature from passing this bill into law. This is an example of

• A) government failure.
• B) collusion.
• C) an externality.
• D) rent-seeking behavior.

---

Definitions:

Mutually Beneficial Trade

Trade agreements between parties that provide gains or advantages to all involved, enhancing each party's welfare.

Relative Cheaper

The comparison of the cost of one product or service to another, indicating that the former is less expensive.

Labor-Intensive

Describing a process or industry that requires a large amount of labor to produce its goods or services.

Comparative Advantage

The ability of a country or firm to produce a particular good or service at a lower opportunity cost than its competitors, which enhances efficiency in international trade.