Question

1. What is moral suasion?

a. changing the monetary policy

b. persuading business to act in the public interest

c. setting standards for the ethical conduct of businesses

d. using governmental subsidies to help firms

2. Which of the following is an argument used against industrial policy?

a. Government interference via industrial policy making reduces market efficiency.

b. The declining competitiveness of the United States in all major global markets is proof of poor industrial policy.

c. The successful use of industrial policy by foreign governments cannot be emulated in the U.S.

d. There has to be a constant change in industrial policy with every successive government.

3. Because of the (lack of) economics of scale, these entities may be most affected by regulation.

a. corporations

b. financial firms

c. production facilities

d. small businesses

4. In order to reduce costs, a plastic manufacturer disposes of toxic waste by dumping it into a river adjacent to its factory without proper treatment. This gives rise to a situation known as a(n):

a. derived demand

b. lemon problem

c. moral suasion

d. negative externality

Answer 1

1) b -  persuading business to act in the public interest

2) a - Government interference via industrial policy making reduces market efficiency

3) d - small businesses (they don't possess economies of scale)

4) d - negative externality