Short-run effects of free trade favor efficiency over employment gains

Steps:

• Recall free trade theory: promotes specialization based on comparative advantage, increasing efficiency quickly.
• Identify short-run impacts: immediate benefits like lower prices and variety, but labor reallocation takes time.
• Evaluate each option: check if it aligns with rapid trade liberalization effects.
• Select least likely: employment often disrupts before net gains emerge.

Why B is correct:

• In the short run, free trade causes job losses in import-competing industries due to Heckscher-Ohlin model, where factors adjust slowly, preventing overall job rises.

Why the others are wrong:

• A: Imports provide cheaper inputs, reducing production costs immediately.
• C: Free trade expands import access, widening consumer goods variety right away.
• D: Foreign entrants boost market competition without delay.

Final answer: B