Question

A major reason why many economists remain critical of the infant industry argument is because it makes the domestic industry inefficient. does not provide guaranteed employment for citizens. affects the standards of living and per capita income of the people. promotes foreign direct investment. leads to reduced prices in domestic markets.

Answer 1

Answer: It makes the domestic industry inefficient.

Step-by-step explanation:

The Infant Industry argument is that developing countries should be allowed to impose tariffs on goods that an infant industry in the country is producing. This is because developing countries need to develop by diversifying their Economy and starting new industries is the way to do it. However, those industries might be doomed to failure from the start if they have to face established companies from outside the country.

Even though some Economists support this idea, there is a general worry that because of the protection afforded to the industry, they may become inefficient because they will lack the competition to spur them to develop strategies that will keep them competitive against other companies.