Suppose that the U.S. government is trying to garner support from Central American countries to pass the newest free trade agreement, Central American Free Trade Agreement (CAFTA). Why might Central American countries argue that in terms of agricultural
products, trade with the United States is not really truly competitive?
What will be an ideal response?
The U.S. government still maintains a number of subsidies for American farmers, allowing them to offer their goods at lower market prices than Central American producers can offer theirs, since their government does not provide them with such subsidies. This allows American farmers to reap unfair gains should free trade be opened between the United States and Central America. It’s likely that Central American countries would argue for the establishment of those subsidies before they would be willing to open trade with the United States.
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Refer to Figure 13-8. Based on the diagram, one can conclude that
A) some existing firms will exit the market. B) the industry is in long-run equilibrium. C) new firms will enter the market. D) firms achieve productive efficiency.
What is the difference between a marginal tax rate and an average tax rate? Which is more important in determining the impact of the tax system on economic behavior?
What will be an ideal response?