The Ricardian model of international trade demonstrates that trade can be mutually beneficial. Why, then, do governments restrict imports of some goods?
A) The Ricardian model is often incorrect in its prediction that trade can be mutually beneficial.
B) Import restrictions are the result of trade wars between hostile countries.
C) Trade can have substantial effects on a country's distribution of income.
D) Imports are only restricted when foreign-made goods do not meet domestic standards of quality.
E) Restrictions on imports are intended to benefit domestic consumers.

Question

Quizplus · Accepted Answer

While the Ricardian model demonstrates that trade can be mutually beneficial, it assumes that the gains from trade are spread evenly across all individuals in a country. In reality, trade can have substantial effects on a country's distribution of income, with some individuals and industries being negatively impacted by increased competition from foreign goods. This can lead to political pressures to restrict imports and protect domestic industries, particularly in democratic societies where politicians are responsive to the interests of their constituents.

The Ricardian Model of International Trade Demonstrates That Trade Can