To the extent that a local content requirement forces firms to locate production in a high-cost nation, product price rises and consumer surplus falls.

Question

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If firms are forced to locate production in a high-cost nation due to local content requirements, they will have to incur higher production costs. As a result, product prices will rise, and consumers will have to pay more for the same product, reducing consumer surplus.

To the Extent That a Local Content Requirement Forces Firms