Question

8 multiple choice 2 points
which of the following conditions makes it most likely for a quota to be imposed?
the benefits of the quota are spread over few and the costs are spread over few.
the benefits of the quota are spread over many and the costs are concentrated on a few.
the benefits of the quota are spread over few and the costs are spread over many.
the benefits of the quota are spread over many and the costs are spread over many.

9 multiple choice 2 points
lower interest rates cause a(n) ______ in capital utilization, which shifts the production function ____ and thereby shifts the lras curve ______.
decrease; downward; leftward
increase; downward; leftward
increase; downward; rightward
increase; upward; rightward
decrease; upward; rightward

Explanation:

Analyze political economy of trade protection

This step examines the incentives for imposing an import quota. According to public choice theory and special interest politics, concentrated benefits and dispersed costs make a policy highly likely to be enacted. A quota benefits a small, concentrated group of domestic producers (few) who have strong incentives to lobby for it. Conversely, the costs are spread over millions of consumers (many), each of whom loses only a small amount, giving them little incentive to organize opposition. Thus, the policy is most likely when benefits are spread over few and costs are spread over many.

Analyze effects of lower interest rates

This step evaluates the macroeconomic impact of lower interest rates on capital and aggregate supply. Lower interest rates reduce the cost of borrowing, which increases investment and capital utilization. An increase in capital utilization means more capital services are actively used in production, which shifts the production function upward (more output is produced for any given level of labor). This expansion in productive capacity shifts the Long-Run Aggregate Supply (LRAS) curve to the right. Therefore, the correct sequence is: increase; upward; rightward.

Answer:

Question 8

• The benefits of the quota are spread over few and the costs are spread over few.
• The benefits of the quota are spread over many and the costs are concentrated on a few.
• The benefits of the quota are spread over few and the costs are spread over many. (Correct answer)
• The benefits of the quota are spread over many and the costs are spread over many.

Question 9

• decrease; downward; leftward
• increase; downward; leftward
• increase; downward; rightward
• increase; upward; rightward (Correct answer)
• decrease; upward; rightward