Imagine That States Could Still Engage in Unrelated Commerce with Foreign

question 7

Multiple Choice

Imagine that states could still engage in unrelated commerce with foreign nations, as they could under the Articles of Confederation.Now, suppose an American president-going against the free trade-oriented, national economic policies of recent American history-placed steep tariffs on imports.What if a group of free trade-friendly states then sought an independent trade agreement with the affected countries? Why might this prove to be as much of a problem today as it was under the Articles?

• A) Allowing states to negotiate trade agreements with foreign countries would bring with it the possibility that one state could try to undermine others in the competition for trade.
• B) A poorly designed trade agreement could send the entire country into a recession, and not just affect the states that developed it.
• C) A poorly designed agreement, and confusion over states' ability to handle oversight of its implementation, could easily send the country into war with a neighbor or foreign ally.
• D) There would be no problem.If the states that sought the trade agreement cooperated with each other, they could overcome any damage done by presidential actions.

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Definitions:

Consumer Surplus

The discrepancy between the aggregate sum consumers are prepared and can afford to spend on a product or service and the actual total amount they end up paying.

Coase Theorem

A principle that if property rights are clearly defined and transaction costs are low, private bargains will ensure that the market always reaches an efficient outcome regardless of who holds the initial property rights.

Externalities

Economic side effects or consequences that affect uninvolved third parties; can be positive or negative.

Cap-And-Trade

An environmental policy mechanism that sets a cap on emissions and allows businesses to buy and sell permits for the right to emit.