Some Proponents of Trade Sanctions Argue for Changes in Policy

question 38

Multiple Choice

Some proponents of trade sanctions argue for changes in policy because they fear low standards will be used to capture markets and foreign investment.While theoretically possible,there is little or no support for the view that countries use low labor standards this way,because

• A)countries with low labor standards generally have trouble attracting foreign investment.
• B)low standards can change a country's comparative advantage.
• C)it is impossible to lower labor standards.
• D)countries would not have an incentive to have low standards.

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Definitions:

Market

A medium that allows buyers and sellers to exchange goods, services, or information.

Highly Competitive Market

A market structure characterized by a large number of sellers and buyers, leading to competitive pricing and minimal market power for individual firms.

Security Market Line

A representation in the capital asset pricing model (CAPM) that displays the relationship between the expected return of a security and its systemic risk.

Beta

A statistic that measures the volatility of a stock or portfolio compared to the market as a whole, used in the CAPM to calculate cost of equity.