Suppose that government procurement liberalization results in the U.K.government importing automobiles from Germany, the low-cost EU manufacturer.Cost savings could result from all of the following EXCEPT
A) competition effect.
B) scale-economy effect.
C) protective effect.
D) trade effect.

Question

Quizplus · Accepted Answer

The protective effect refers to the negative impact of trade liberalization on domestic industries that face increased competition from foreign competitors. Since government procurement liberalization involves the government importing from a low-cost foreign supplier, there is no protective effect. The cost savings could come from the competition effect (competition leading to lower prices), scale-economy effect (lower per-unit costs due to increased production volume), and trade effect (increased imports leading to lower prices).

Suppose That Government Procurement Liberalization Results in the U