What is one effect of trade barriers on domestic industries?

What is one effect of trade barriers on domestic industries?

• A. Increased competition from foreign goods
• B. Protection from international competition
• C. Greater variety of products
• D. Lower prices for consumers

Answer: (B)

Trade barriers, such as tariffs, quotas, and import licenses, are used by governments to limit the amount of foreign goods entering a country. One significant effect of these barriers is the protection they offer to domestic industries. By restricting foreign competition, trade barriers allow local businesses to maintain a larger market share without having to compete as aggressively on factors like price or quality with international firms. This protection enables domestic industries to stabilize and potentially grow, as they are less exposed to the fluctuations of global markets. In this environment, local companies can invest in their infrastructure, expand their operations, and focus on improving their products knowing that their direct competitors are limited in number. Consequently, consumers may see less competition from foreign products, which can sometimes lead to higher prices or fewer choices, reinforcing the protective effect of trade barriers on domestic industries.

Trade barriers, such as tariffs, quotas, and import licenses, are used by governments to limit the amount of foreign goods entering a country. One significant effect of these barriers is the protection they offer to domestic industries. By restricting foreign competition, trade barriers allow local businesses to maintain a larger market share without having to compete as aggressively on factors like price or quality with international firms.

This protection enables domestic industries to stabilize and potentially grow, as they are less exposed to the fluctuations of global markets. In this environment, local companies can invest in their infrastructure, expand their operations, and focus on improving their products knowing that their direct competitors are limited in number. Consequently, consumers may see less competition from foreign products, which can sometimes lead to higher prices or fewer choices, reinforcing the protective effect of trade barriers on domestic industries.