Two Economists Are Debating Whether to Remove a Tariff on Luxury

question 35

Multiple Choice

Two economists are debating whether to remove a tariff on luxury vehicles. They agree that consumers will benefit by $5 billion and that the harm done to domestic businesses and workers will be only $4 billion. One argues that these facts make it obvious that the tariff should be removed. The other disagrees. What would be a likely reason for the second economist to disagree?

• A) There is no good reason because the benefits outweigh the costs.
• B) He or she is using a different economic model to understand the world.
• C) He or she has a different interpretation of the empirical evidence.
• D) He or she has different value judgments about the weights that should be put on the benefits and costs.

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Definitions:

Proportionate Shares

The allocation of benefits, responsibilities, or liabilities among parties in relation to their respective interests or contributions.

Priority

The status of having precedence or importance over others, often used in the context of orders of payment, task handling, or legal rights.

Security Interest

A legal claim or right granted by a borrower to a lender over the borrower's assets as collateral for the loan, ensuring repayment security.

Perfected

In legal and finance terms, a status indicating that an interest, often a security interest in property, is formally established and recognized.