Question

5- What is the law of diminishing control?

6- Explain the principle of comparative advantage. Does it tell vs how the gains from trade will be distributed?

Answer 1

Answer 5;

The law of diminishing control states that whenever a regulatory system is set up, the individuals or firms being regulated by this regulatory system in place will figure out the ways how to circumvent these laws. Thus the aim of control with which the regulation was brought into place will diminish as circumvention increases.

Answer 6:

Comparative advantage refers to the ability of a nation or person to produce a good at a lower opportunity cost than another nation or person. The principle of comparative advantage states that countries should produce the good in which it has a comparative advantage and export that good and import other good from the nation in which that nation has a comparative advantage.It leads to gains of trade for both the nations and it will be distributed between these two nations.