What is the main reason for the failure of import-substitution strategies to generate rapid economic growth?
A) Deteriorating terms of trade
B) Scarce natural resources
C) Inefficient allocation of resources
D) Lack of self-interested behavior by entrepreneurs
E) Insufficient subsidies to domestic producers

Question

Quizplus · Accepted Answer

Import-substitution strategies involve protecting domestic industries from foreign competition through tariffs, quotas, and other restrictions on imports. This protection can lead to inefficiencies in the allocation of resources as firms may not have the same incentives to innovate or be efficient as they would in a more competitive market. This can result in higher costs and lower quality products, making it difficult for firms to be competitive in international markets. As a result, import-substitution strategies can lead to slower economic growth compared to strategies that promote greater competition and efficiency.

What Is the Main Reason for the Failure of Import-Substitution