Question

Which theories of trade support government intervention in trade? Name them and briefly discuss their rationale for supporting government intervention.

Answer 1

ans:Governments erect trade barriers and intervene in other ways that restrict or alter free trade. Protectionism refers to trade and investment barriers applied with the aim of defending domestic markets and industries. ... Subsidies are financial or other resources that a government provides to a firm or group of firms.

Governments undertake intervention to achieve several goals, including: to generate revenue, to achieve policy objectives, and to protect or support the nation's citizens or private firms.

The government tries to combat market inequities through regulation, taxation, and subsidies. Governments may also intervene in markets to promote general economic fairness. Maximizing social welfare is one of the most common and best understood reasons for government intervention.