Why might a country seek to protect an industry, even when the benefits are greatly outweighed by the cost?
What will be an ideal response?
First of all, a country’s government might face political pressure from domestic groups, such as a worker’s union in the disadvantage industry, to protect that industry. Interest groups can also collude together to promote protectionism in various industries. The public may also be drawn in by claims of the benefits of protectionism, such as protected domestic employment and staying loyal to their patriotic identity.
Also, unlike the benefits of protectionism, the costs are not directly visible to the public. This occurs because the costs are imbedded in the price of the protected goods and spread across millions of people, so that the cost born by an individual citizen is quite small. This leads to very little organized public protest against protectionism.
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A single firm in a competitive labor market has a labor supply curve that is
A) upward sloping. B) perfectly inelastic. C) perfectly elastic. D) downward sloping.
When the Federal Reserve sells government bonds to the public, it directly
a. increases the M1 money supply and increases the reserves of the commercial banking system. b. increases the M1 money supply, while reducing the reserves of the commercial banking system. c. reduces the M1 money supply, while increasing the reserves of the commercial banking system. d. reduces the M1 money supply and decreases the reserves of the commercial banking system.