Economic Studies Have Concluded That a New Bill Lowering the Trade

question 249

Multiple Choice

Economic studies have concluded that a new bill lowering the trade restrictions on the importation of sugar would be good for the economy. President Sweet Tooth highlights the results of this study in his state of the union address and sends the "Sweet Tooth" bill to Congress. Another economic study declares that subsidizing coal mining and orange growing have both been found to be economically inefficient in that the costs outweigh the benefits. However, a subsidy on coal mining would help the coal producers in West Virginia and a subsidy on orange growing would help the orange farmers in Florida. So when the "Sweet Tooth" bill makes its way through congress the senators from West Virginia and Florida will only vote for it if they have their coal-mining and orange-growing subsidies attached to it. The bill gets to President Sweet Tooth with these and other economically inefficient subsidies attached to it, and he passes the bill in its entirety. Which term best describes what just happened?

• A) pork-barrel legislation
• B) public good provision
• C) rational-ignorance effect
• D) the political voter theory

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Definitions:

Asset Turnover

A ratio determining the efficacy of a company's asset utilization in creating sales revenue.

Current Ratio

An indicator of a company's short-term financial health, determined by dividing its assets due within a year by its liabilities due in the same timeframe.

Net Working Capital

The discrepancy between a firm's immediate assets and its short-term obligations.

Liquid Ratio

A financial metric comparing a company's liquid assets (cash and marketable securities) to its current liabilities, often used to assess liquidity.