CA Foundation · Business Economics · International Trade
The 'infant industry' argument for protection is best described as:
The infant industry argument supports temporary protection for a newly established industry so that it can build scale, skills and efficiency, then face global competition without help. It is not about permanent shelter, import bans, or duties against dumping, which are separate arguments.
- AProtecting an industry permanently because it employs many workers
- BTemporary protection for a new industry until it gains scale and can compete internationallyCorrect
- CBanning imports of consumer goods to improve the balance of payments
- DImposing duties on goods that foreign firms sell below their cost of production
Explanation
The infant industry argument says a new domestic industry needs temporary shelter from established foreign firms until it achieves economies of scale and learning, after which protection should be withdrawn. Permanent protection is not the argument, and selling below cost refers to dumping.
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