Suppose the Swiss Government Subsidized Its Watch-Making Industry,enabling Swiss Producers

question 60

Multiple Choice

Suppose the Swiss government subsidized its watch-making industry,enabling Swiss producers to undersell foreign watch producers.The law of comparative advantage indicates that watch-importing nations would best take advantage of the Swiss subsidization policy by

• A)setting a tariff high enough to just offset the subsidy granted to the Swiss watch-making industry.
• B)setting a declining quota on the import of Swiss watches such that the nation's domestic watch-making industry would continue to grow at the same rate as the rest of the economy.
• C)setting a tariff such that the prices of Swiss and domestic watches to the consumer are equal.
• D)gladly accepting the subsidy of the Swiss government,making the appropriate adjustment for the resources temporarily displaced from the domestic watch-making industry.

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Definitions:

Stress

A psychological and physical response to demands or threats, often characterized by feelings of tension, worry, and heightened arousal.

Hindsight Bias

The tendency to believe, after learning an outcome, that one would have foreseen it, often referred to as the "I-knew-it-all-along" phenomenon.

Confirmation Bias

Confirmation bias is the tendency to search for, interpret, favor, and recall information in a way that confirms one's preexisting beliefs or hypotheses.

Counterfactual Thinking

The mental process of imagining alternative scenarios and outcomes that didn't actually happen.