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trade restrictions

1. When economists with different political views do cost/benefit comparisons, they often reach different conclusions. If their analysis is based on objective costs and valid techniques, why wouldn't they reach similar conclusions, even if those conclusions conflicted with their political beliefs? Explain.

2. Why do we say that competitive markets are efficient?

3. What are the six main methods used by governments to restrict trade?

4. List six reasons why countries impose trade restrictions.

5. What are the main reasons why economists typically oppose the use of trade restrictions?

Solution Preview

1. Whenever we talk about economic models we start with certain assumptions, and these assumptions end up defining the result in most cases. The difference is the way in which you set up these assumptions. When economists with political leanings go about setting up their assumptions these assumptions include their political leanings.

To give an example suppose that you live in Philadelphia, PA and you go on Interstate 95. If you take the exit to I-95 north you reach New York City, and if you take the same road south you get to Washington D.C. You did everything same once you got on the road, but what was different was what you did before getting on the highway!

This is what happens in economics. Consider the case of the GM bankruptcy filing. A Republican government would have probably handled the issue differently. A Democrat administration with some of the best economic brains with them felt that $20 billion that GM ...

Solution Summary

Reasons for trade restrictions are represented.