If Scotland is better than Ireland at producing whisky, but Ireland is better than Scotland at producing beer, what should happen?
A) Ireland should sell beer to Scotland and should buy Scottish whisky.
B) Ireland should impose a tariff on Scottish whisky in order to protect jobs in the Irish beer industry.
C) Ireland should subsidize its whisky industry so that it can compete with Scottish whisky.
D) Ireland should put a quota on the amount of Scottish whisky imported.

Question

Quizplus · Accepted Answer

By specializing in their respective areas of comparative advantage, Scotland and Ireland can both benefit from trading with each other. Ireland can sell beer to Scotland and use the revenue to buy Scottish whisky. This results in increased efficiency and greater output for both countries. imposing tariffs or quotas, or subsidizing industries, would reduce efficiency and harm consumers by increasing prices.

If Scotland Is Better Than Ireland at Producing Whisky, but Ireland