A Game-Theory Explanation of the Paradox That Even Though All

question 36

Multiple Choice

A game-theory explanation of the paradox that even though all countries would benefit if each chose free trade, in fact each tends to follow protectionist policies is

• A) trade war.
• B) collective action.
• C) prisoner's dilemma.
• D) benefit-cost analysis.
• E) rent seeking.

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Definitions:

Inelastic

A characteristic of a good or service whose demand doesn't significantly change when its price changes.

Tax Burden

the distribution of taxation on an individual or economic entity or the total amount of taxes paid by society as a whole.

Rent Controls

are government-imposed limits on the amount landlords can charge tenants for rent.

FICA Tax

The FICA tax is a United States federal payroll tax imposed on both employees and employers to fund Social Security and Medicare.