The Tradeoffs of Trade Policy

Self-Check Questions

How does competition, whether domestic or foreign, harm businesses?

Hint:

Competition from firms with better or cheaper products can reduce a business’s profits, and may drive it out of business. Workers would similarly lose income or even their jobs.

What are the gains from competition?

Hint:

Consumers get better or less expensive products. Businesses with the better or cheaper products increase their profits. Employees of those businesses earn more income. On balance, the gains outweigh the losses to a nation.

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