Which of the following statements is FALSE?
A) International trade restrictions limit specialization and the division of labor.
B) International trade restrictions reduce the volume of trade and the gains from trade.
C) International trade restrictions cause nations to produce inside their production possibilities frontier.
D) International trade restrictions result in a country producing some of the product of its comparative disadvantage.

Question

Quizplus · Accepted Answer

International trade restrictions typically cause nations to produce on their production possibilities frontier but in a less efficient mix, not inside it. The restrictions force countries to allocate resources to produce goods that they could have imported more efficiently, but this does not mean they produce less than their potential output; rather, they produce a less optimal combination of goods.

Which of the Following Statements Is FALSE