Question

You are watching an election debate on television. A candidate says, “We need to stop the flow of foreign automobiles into our country. If we limit the importation of autos, our domestic auto production will rise and the United States will be better off.”

1. Is it likely that the United States will be better off if we limit auto imports? Explain.
2. Will anyone in the United States be better off if we limit auto imports? Explain.
3. In the real world, does every person in the country gain when restrictions on imports are reduced? Explain.

Answer 1

1> No, US will not be better off. Because in a free market, the trade happens because of mutual interest. Thus, US has to produce auto on their own and this will increase the price of those products and thus, the consumers will be the losers. So, US will not be better off if such limit is done.

2> Yes, limiting auto imports will make the US producers better off because they can then produce and sell at a higher price and this will make their business more profitable because it reduces the competiotion.

3> No, because of the restriction on imports, many consumers have to pay higher price for the same product. Thus, it will not help everyone.