Question

When A Country ignores the principles of comparative advantage and decides to produce a good in which it does not have comparative advantage, _______ are negatively affected and _____ are protected.

A) consumers, producers

B) consumers, government

Answer 1

Option A.

• When a country ignores the principles of comparative afadvanta and decides to produce a good in which it does not have comparative advantage, consumers are negatively affected and the producer's are protected.
• A country is said to have comparative advantage when it produces good quality goods at lower prices.
• To achieve competitive advantage, the producer's have to spend a lot to use high quality resources and are forced to sell those goods at lower rates.
• But in the absence of comparative advantage, the consumers are hurted as they have to pay higher rates and get only low quality products.
• The producer's benefit as they no longer have to use costly and high quality raw materials to manufacture their goods.