Which of the following best describes a reason why countries establish limits on international trade?

• A. To protect domestic industries from foreign competition
• B. To increase the efficiency of resource allocation globally
• C. To encourage monopolistic practices within the domestic market
• D. To address negative externalities associated with certain imports

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the concept of international trade limits, often called trade barriers, which include tariffs, quotas, and regulations that countries use to control the amount and type of goods coming into their markets.
2. Step 2: Recognize that one primary reason countries impose these limits is to protect domestic industries from foreign competition, allowing local businesses to grow without being overwhelmed by cheaper or more abundant foreign goods.
3. Step 3: Consider the alternative reasons given, such as increasing global resource allocation efficiency, which is generally a benefit of free trade rather than a reason to limit trade.
4. Step 4: Evaluate the idea of encouraging monopolistic practices, which is typically not a goal of trade limits since monopolies can harm consumers and are usually regulated against.
5. Step 5: Understand that another valid reason for trade limits is to address negative externalities, such as environmental harm or health risks associated with certain imports, which justifies restrictions to protect public welfare.