There Is a Bias in the Political Process Against Free

question 35

Multiple Choice

There is a bias in the political process against free trade because

• A) those who lose from free trade are better organized than those who gain.
• B) the gains from free trade cannot be measured.
• C) those who gain from free trade can't compensate those who lose.
• D) foreign governments make large donations to U.S. political campaigns.
• E) there is a high correlation between the volume of imports and the unemployment rate.

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Definitions:

Positive Externalities

Benefits that are enjoyed by third-parties as a result of an economic transaction or activity, without them directly participating in the transaction.

Pigouvian Tax

A tax imposed on activities that generate negative externalities, aimed at correcting an inefficient market outcome.

Marginal Social Benefits

The incremental benefit the public receives from consuming an additional unit of a good or service.

Marginal Private Benefits

The additional benefits received by an individual or firm from consuming or producing one extra unit of a good, not considering external effects.