CA Foundation · Business Economics · International Trade
The 'infant industry' argument for imposing a tariff suggests that:
The infant industry argument holds that newly established domestic industries need temporary tariff protection from foreign competition. Once they have grown, learned and gained economies of scale, the protection should be removed so they can compete on their own in the global market.
- ATariffs should be permanent to keep consumer prices high
- BNew domestic industries need temporary protection until they become efficient enough to compete globallyCorrect
- CTariffs help industries that already have a strong export position
- DOnly agricultural goods should be protected from imports
Explanation
The infant industry argument says young industries face high initial costs and cannot compete with established foreign firms, so temporary protection helps them grow and gain economies of scale. It does not advocate permanent protection. Mature export-oriented industries do not need such protection.
Did you get it right without looking?
One question tells you little. A timed set on International Trade shows your real accuracy, how long you take and where you lose marks.
More International Trade questions
- In India's balance of payments, which of the following transactions is recorded in the capital account (as per the ICAI Foundation treatment…
- India fixes an import quota of 50,000 tonnes of edible oil. Under free trade, India would import 80,000 tonnes at the world price of ₹100 pe…
- Which of the following is an example of an export promotion measure used by a government?
- Which of the following best captures the 'infant industry' argument for protection?
- In India, 1 hour of labour produces either 6 metres of cloth or 3 kg of tea. In Sri Lanka, 1 hour produces either 2 metres of cloth or 2 kg …
- Under a trade policy of import substitution, a developing country like India would typically: