An effective Buy American law results in deadweight welfare losses for the United States in the form of the protective effect and consumption effect.

Question

Quizplus · Accepted Answer

A Buy American law would result in increased domestic demand for wine, leading to a higher price and reduced quantity supplied. This creates a deadweight loss in the form of the protective effect (reduced gains from trade) and the consumption effect (reduced overall consumption).

An Effective Buy American Law Results in Deadweight Welfare Losses