Strategic trade suggests that governments should:

Question

Quizplus · Accepted Answer

Strategic trade theory suggests that the government should play an active role in developing a comparative advantage in emerging sectors by providing subsidies, tax breaks, or other forms of support to domestic firms. This is because emerging sectors are often subjected to market failures such as imperfect competition, high entry barriers, and capital market imperfections, which prevent firms from achieving the optimal level of investment and innovation. By creating a level playing field between domestic and foreign firms in these sectors, the government can promote economic growth, increase employment, and enhance national welfare.

Strategic Trade Suggests That Governments Should