Question

1. Which of the following arguments in favor of free trade are FALSE?

A) Domestic problems are best solved with domestic solutions

B) As long as trade is not based on low wages, trade can be beneficial to all countries involved.

C) Free trade allows a more efficient use of resources than protectionism.

D) Trade policy is grossly inefficient in achieving domestic policy goals.

E) In the case of a small country, the efficiency losses associated with protectionism are often greater than any gains.

Answer 1

Answer: (d) Trade policies is grossly inefficient in achieving domestic policy goals.

In case of free trade, you need to have a proper framework of trade pattern that limits the trade sectors to those in need. Otherwise the imported goods which could be of cheaper value will rule the market sentiments while those domestically produced goods with little more pricing will be affected negatively. In that means, the trade policies are inefficient.

Steps must be taken to integrate the domestic production units to achieve its goals of consumption and exports.