The efficiency case made for free trade is that as trade distortions such as tariffs are dismantled and removed

Question

Quizplus · Accepted Answer

The efficiency case made for free trade is based on the idea that trade distortions such as tariffs create deadweight losses for both producers and consumers. These losses occur because tariffs increase the price of the imported good, lowering the quantity demanded by consumers, and reducing the quantity supplied by producers. Removing tariffs would reduce these deadweight losses, hence increasing national economic welfare. While government tariff revenue may decrease, the increase in overall economic welfare would more than compensate for this loss. Therefore, the correct answer is C.

The Efficiency Case Made for Free Trade Is That as Trade