A free trade agreement is likely to increase efficiency because of ________.

Question

Quizplus · Accepted Answer

Increased competition encourages producers to become more efficient and reduce costs in order to remain competitive in the market. This leads to lower prices for consumers and increased economic efficiency. Decreased competition, as stated in option A, would lead to less incentive for producers to improve and innovate, thus decreasing efficiency. Options C and D refer to trade effects, but they do not directly impact efficiency.

A Free Trade Agreement Is Likely to Increase Efficiency Because