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Chapter 21: Q. 40 (page 523)

If trade barriers hurt the average worker in an economy (due to lower wages), why does the government create trade barriers?

Short Answer

Expert verified

To protect the domestic industry and hence the jobs of people dependent on it.

Step by step solution

01

Step1. Introduction

Trade barriers are methods which are taken up to protect the domestic industry from the foreign competition.

02

Step2. Explanation

Trade barriers although reduce the average wages in the country, it still is important to impose them because it is important to protect the domestic industries to let them grow and develop and become self reliant. It is also important to protect the jobs of the workers working in this domestic industry.

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Most popular questions from this chapter

Who gains and who loses from trade?

From the Work It Out "Effects of Trade Barriers," you can see that a tariff raises the price of imports. What is interesting is that the price rises by less than the amount of the tariff. Who pays the rest of the tariff amount? Can you show this graphically?

Explain how trade barriers raise wages in protected industries by reducing average wages economy-wide.

How can governments identify good candidates for infant industry protection? Can you suggest some key characteristics of good candidates? Why are industries like computers not good candidates for infant industry protection?

Is international trade likely to have roughly the

same effect on the number of jobs in each individual

industry?
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