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Friday, November 03, 2006

Microeconomics quiz of the week

From the WSJ's ProfessorJournal.com:
The article reports that more than one-quarter of top corporate political donors have stepped up their giving slightly to Democrats. The article states that these corporate donors apparently are giving more to Democrats so as to hedge their bets, which of course presumes a benefit of giving money to the winning party. While the increase in new giving is not large, it represents more cash to the Democrats in a year when they have managed to stay finically competitive with, or surpass, their Republican adversaries.

1.) What is "hedging"? (Check Wikipedia.) In political donations, why is giving to both Democrats and Republicans a form of hedging?

2.) What are the benefits to corporations of donating to political parties and candidates? Include a discussion Wal-Mart.

3.) Based on Federal Election Commission data, the companies presented in the article's bar chart give more to the Republican party than to the Democratic party. Why?

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