When a developing country relies on import substitution,
A)it sacrifices the gains from specialization and comparative advantage
B)replaces low-cost foreign goods with high-cost domestic goods
C)domestic producers, shielded from foreign competition, usually fail to become efficient
D)other countries often retaliate with their own trade restrictions
E)All of the answers are correct

Question

Quizplus · Accepted Answer

All of the answers are correct. When a developing country relies on import substitution, it sacrifices the gains from specialization and comparative advantage, replaces low-cost foreign goods with high-cost domestic goods, domestic producers shielded from foreign competition usually fail to become efficient, and other countries often retaliate with their own trade restrictions.

When a Developing Country Relies on Import Substitution