Answer to Question #99840 in Macroeconomics for Tiffany

Question

5. The imaginary nation of Washingtonia prohibits the import of foreign-made pharmaceuticals. What effect does this have on the well-being of people in Washingtonia who consume pharmaceuticals? Who benefits from this trade restriction?

Answer 1

If Washingtonia is banned from importing foreign-made pharmaceuticals, residents of Washingtonia State may use pharmaceutical products manufactured in Washington only. This ensures full use of available resources. This will also positively affect domestic producers, as the demand for their products increases. However, this innovation may adversely affect the welfare of citizens if the level of development in the pharmaceutical industry is lower than in countries whose pharmaceutical preparations were imported.