Describe an arms race in economic terms. Is it rational for ...

[Coya19@aol.com]

Describe an arms race in economic terms. Is it rational for countries to participate in an arms race?
 
  What will be an ideal response?

Question 2

If all conditions for a perfectly competitive market are met
 
  A) firms face sunk cost when entering the market.
  B) firms' demand curves are horizontal.
  C) the market demand curve is horizontal.
  D) the firms' demand curves are downward-sloping.

[k.lashomb]

Answer to Question 1

An arms race is a prisoners' dilemma where it is in each participant's best interest to participate in an arms race and try to win the race. If the participants could agree to not participate, for example by signing treaties limiting military buildup, then both countries would be made better off. It is rational for countries to participate in an arms race even though it makes them worse off then they would be if they cooperated. That is because if they are lightly armed and their opponent is heavily armed and they get in a conflict they will suffer higher losses than if they were both armed and get in a conflict.

Answer to Question 2

B