CA Foundation · Business Economics · International Trade
Which of the following is an argument commonly advanced in favour of free trade rather than protection?
The argument favouring free trade is that it widens consumer choice and lowers prices. Competition and specialisation based on comparative advantage allocate resources efficiently. The other options, shielding infant industries, defence self-sufficiency and retaliation against dumping, are arguments used to justify protection.
- AIt allows a country to shield its infant industries from foreign competition
- BIt widens consumer choice and lowers prices through competition and efficient use of resourcesCorrect
- CIt reduces dependence on foreign suppliers for defence-related goods
- DIt lets a country retaliate against dumping by foreign producers
Explanation
Free trade lets each country specialise according to comparative advantage, which promotes efficient resource use, competition, lower prices and greater variety for consumers. The other options are classic arguments for protection: infant industry, national security and anti-dumping measures.
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