Multiple Choice
A negative result of high tariffs is that they can sometimes lead to which of the following?
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7. Externalities
Externalities: Social Benefits and Social Costs
Multiple Choice
Which of the following is a potential negative result of trade agreements in the context of externalities, social benefits, and social costs?
A
Sanctions
B
Higher tariffs
C
Job loss
D
Protectionism
Verified step by step guidance1
Step 1: Understand the context of trade agreements and their impact on externalities, social benefits, and social costs. Trade agreements typically aim to reduce barriers like tariffs and quotas to encourage trade between countries.
Step 2: Recognize that while trade agreements can increase overall economic efficiency and social benefits, they may also lead to negative social costs such as job losses in certain industries due to increased competition from imports.
Step 3: Identify that sanctions and higher tariffs are generally tools used to restrict trade rather than results of trade agreements, and protectionism refers to policies that protect domestic industries, which trade agreements usually seek to reduce.
Step 4: Analyze how job loss can be a negative externality or social cost because workers in industries exposed to international competition may lose employment, even if the overall economy benefits.
Step 5: Conclude that among the options given, job loss is a potential negative result of trade agreements related to externalities, social benefits, and social costs.
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