Which of the following statements is incorrect?
A)In a first-best world, import-competing firms that are struggling to stay in business would be allowed to go out of business and workers would find jobs in other industries.
B)If we want to help workers who lose jobs when a domestic industry shrinks, the specificity rule suggests that the government should provide subsidies to those workers to relocate to areas where jobs are available.
C)According to the protectionists, the most efficient policy to save jobs in the import-competing industries is to impose barriers on imports.
D)In a first-best world, if rising import competition is driving domestic producers out of business, the government must intervene to protect the domestic firms.

Question

Quizplus · Accepted Answer

In a first-best world, the government should not intervene to protect domestic firms from rising import competition. This is because such intervention would lead to a misallocation of resources, which could result in higher prices and reduced output. In a first-best world, the government's role should be limited to providing a safety net for the workers who lose their jobs when domestic firms go out of business.

Which of the Following Statements Is Incorrect