Answer to Question 1
There are many myths about trade restrictions. The problem mentions three of them, all false reasons often offered as reasons to restrict international trade. These arguments are:
Trade restrictions save domestic jobs: This argument ignores the fact that, under free trade, consumers in the importing country will have greater disposable income and citizens in the exporting countries will have greater incomes. This means total demand for the goods and services that are exported by our domestic industry increases, increasing the number of jobs created in the domestic industries under free trade.
Trade restrictions penalize lax environmental standards: Not all developing countries have lax environmental standards. Also, a clean environment is a normal good. Countries that are relatively poor and have lax pollution standards do not care as much about the environment because imposing clean air, water, and land standards have a high opportunity cost because they will slow economic development. The best way to encourage environmental quality is not to restrict economic development but to encourage rapid economic growth, which will more quickly increase citizen demand for a cleaner environment in those developing countries.
Trade restrictions prevent rich countries from exploiting poorer countries: Importing goods made in countries with low wage levels increases the demand for labor in those countries, increasing the number of jobs available and raising wages over time. The more free trade that occurs with these countries, the more quickly the wages will rise and the working conditions will increase in quality and safety.
Answer to Question 2
B
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