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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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Explain how predatory pricing could be a motivation for dumping.

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