Franky Believes That There Should Be No Trade Restrictions for Any

question 174

Multiple Choice

Franky believes that there should be no trade restrictions for any reason.What effect would Franky say that trade restrictions have on prices?

• A) He would argue that by encouraging competition with trade restrictions,prices are likely to decrease.
• B) He would argue that restrictions would cause greater competition and therefore lead to higher prices.
• C) He would say that trade restrictions have no impact on prices,but they do restrict consumers' choices.
• D) He would say that restrictions reduce competition and therefore cause an increase in prices.
• E) He would argue that trade restrictions increase prices because they break up domestic monopolies.

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Definitions:

Principal-Agent Problem

A dilemma in economics where one party (the agent) is expected to act in the best interest of another (the principal), but may have personal incentives that conflict with this duty.

Managers

Individuals in an organization responsible for directing the efforts of others and overseeing business operations to achieve certain goals.

Absentee Owners

Absentee owners are individuals or entities that own a business or property but do not actively manage it or live on its premises.

Moral Hazard

A situation where the behavior of an individual or entity changes to take on more risk because they do not bear the full consequences of that risk.