CA Foundation · Business Economics · International Trade
Which of the following is a standard argument for free trade rather than protection?
Free trade is supported because it lets countries specialise in goods where they hold a comparative advantage. This raises total output, improves efficiency and gives consumers more choice at lower prices. Shielding industries, cutting imports and earning duty revenue are motives for protection, not free trade.
- AIt allows countries to specialise according to comparative advantage, raising output and giving consumers wider choice at lower pricesCorrect
- BIt shields domestic industries from foreign competition permanently
- CIt helps a country reduce imports in order to improve its trade balance
- DIt lets the government earn revenue from import duties
Explanation
Free trade allows specialisation by comparative advantage, giving efficiency gains and greater variety at lower prices. The other options describe features or aims of protection, such as shielding industries, cutting imports and earning duty revenue.
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