According to Empirical Observations,the Cost of Restricting International Trade in the U.S.is

question 57

Multiple Choice

According to empirical observations,the cost of restricting international trade in the U.S.is much greater than the benefits generated from restriction.In the light of the above observation,which of the following statements is true?

• A)The benefits of protecting domestic jobs typically outweigh the costs.
• B)Consumers end up paying much more for the goods they buy in order to subsidize the relatively inefficient domestic producer.
• C)U.S.GDP would be over $14 billion higher with import restrictions than without restrictions.
• D)Protection of the U.S.textile and sugar industries means that all consumers pay a lower price for clothing and sugar.
• E)Protection of the domestic industries enable the producers to charge lower prices for their products.

Understand the concept of rationality in economic behavior.

Recognize the impact of personal biases and systematic mistakes in decision making.

Identify the assumption of rational behavior in economic models.

Analyze how people weigh observational vs. statistical information in their choices.

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Definitions:

Actual Interest Rate

The actual rate of interest earned or paid on an investment or loan, considering compounding and other factors, as opposed to the nominal rate.

Non-Interest-Bearing Note

A type of debt instrument that does not pay interest to the holder, instead being issued at a discount to its redemption value.

Discount Rate

The interest rate used to discount future cash flows to their present value; often reflects the risk-free interest rate.

Discount Rate

The discount rate is the interest rate set by central banks charged to commercial banks for loans, affecting the cost of borrowing money.