Multiple Choice
Which of the following is an example of a positive externality (additional social benefit)?
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7. Externalities
Externalities: Social Benefits and Social Costs
Multiple Choice
Why does protectionism tend to cost jobs in other unprotected industries?
A
Because protectionism leads to higher productivity in unprotected industries, resulting in fewer jobs.
B
Because protectionism causes the government to subsidize all industries equally.
C
Because protectionism increases competition from foreign firms in unprotected industries.
D
Because protectionism raises prices for consumers, reducing their purchasing power and demand for goods from unprotected industries.
Verified step by step guidance1
Understand that protectionism involves policies like tariffs or quotas that restrict imports to protect domestic industries.
Recognize that protectionism raises the prices of imported goods, which often leads to higher prices for consumers on those goods.
Analyze how higher prices reduce consumers' real purchasing power, meaning they have less money to spend on other goods and services.
Consider that with reduced purchasing power, consumers buy fewer goods from unprotected domestic industries, lowering demand in those sectors.
Conclude that lower demand in unprotected industries can lead to reduced production and thus fewer jobs in those industries.
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