Economic theory and empirical evidence suggest that trade barriers such as tariffs or quotas lead to increases in prices, reduced variety and quality of goods, and inefficient allocation of resources. These costs can outweigh any benefits such as protecting domestic industries or creating jobs in the short term. As a result, trade barriers create an efficiency loss for society, making D the best choice.

Solved

Studies Show That

Question 151

Multiple Choice

Studies show that:

A) it is impossible to estimate the benefits of trade barriers.
B) costs and benefits of trade barriers are about equal.
C) benefits of trade barriers exceed their costs in less developed nations.
D) costs of trade barriers exceed their benefits, creating an efficiency loss for society.

Correct Answer: