The Prisoners' Dilemma Exercise Suggests That

question 18

Multiple Choice

The prisoners' dilemma exercise suggests that

• A) even when all countries would benefit from trade liberalization, political dynamics trap governments in a protectionist world.
• B) even when all countries would benefit from protectionism, political dynamics trap governments in a liberalization world.
• C) even when no countries would benefit from trade liberalization, political dynamics trap governments in a protectionist world.
• D) even when no countries would benefit from protectionism, political dynamics trap governments in a liberalization world.
• E) trade liberalization and protectionism benefit all countries equally.

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Definitions:

Surplus

A situation in which the quantity of goods or services supplied exceeds the quantity demanded at the current price.

Tax Revenue

The money that is amassed by governments as a result of taxation.

State Income Tax

A tax imposed by a state on the income of its residents and on income earned within the state by nonresidents.

Sales Taxes

Taxes imposed on sales of goods and services, typically calculated as a percentage of the selling price.