a) It is sometimes argued that, if a government protects a domestic industry (for example, using tariffs or subsidies) that is facing import competition from a more efficient foreign industry, this would be a net gain for the country as a whole, even if the foreign industry is itself protected. Give arguments for and against this pointof view, drawing on Ricardo’s theory of trade, the Standard Model, and other theory that you consider relevant. Finally, does the size of the country matter?
a) It is sometimes argued that, if a government protects a domestic industry (for example, using tariffs or subsidies) that is facing import competition from a more efficient foreign industry, this would be a net gain for the country as a whole, even if the foreign industry is itself protected. Give arguments for and against this pointof view, drawing on Ricardo’s theory of trade, the Standard Model, and other theory that you consider relevant. Finally, does the size of the country matter?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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a) It is sometimes argued that, if a government protects a domestic industry (for example, using tariffs or subsidies) that is facing import competition from a more efficient foreign industry, this would be a net gain for the country as a whole, even if the foreign industry is itself protected. Give arguments for and against this pointof view, drawing on Ricardo’s theory of trade, the Standard Model, and other theory that you consider relevant. Finally, does the size of the country matter?
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