Question

Which of the following describes the infant industry argument for protectionism?

a. Domestic producers require time to gain experience and lower their unit costs; this will allow these producers to compete successfully in international markets.
b. An industry must be protected in its early stages of development so that firms can compete with government-subsidized foreign competition.
c. Domestic producers in high-wage countries must be protected from foreign producers in low-wage countries to produce a level playing field.
d. Some strategic industries must be protected to ensure adequate supplies of resources needed for national defense in emergencies.

Answer 1

a. Domestic producers require time to gain experience and lower their unit costs; this will allow these producers to compete successfully in international markets.

Step-by-step explanation:

According to the infant-industry theory, new industries in emerging and developing economies need protection for unfair competition from industries in advanced economies. The new industries need time to grow and develop economies of scale that can match those from more developed economies.

Economists describe infant industries as those in their early stages of development and, as such, cannot compete favorably with established rivals. Proponents of Infant-economies protection argue that infant industries need protection from international competitors capable of flooding domestic markets with cheaper goods. Protection assist infant industries to mature and develop economies of scale.