An Example of the "Infant Industry" Argument for Trade Protection

question 15

Multiple Choice

An example of the "infant industry" argument for trade protection is that

• A)tariffs should be implemented in order to improve the terms of trade and thereby maximize the gains from trade.
• B)tariffs should not be imposed on countries that have democratic governments.
• C)in the presence of unexploited scale economies,tariff protection may permit a country to develop future comparative advantage in certain products.
• D)imports of certain products should be limited in the interests of national defence.
• E)"strategic" trade policy is helpful when other countries are also being strategic.

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Definitions:

Present Value

Present Value is the current worth of a future sum of money or stream of cash flows, given a specified rate of return.

Compound Interest

Calculating interest by considering the base amount of a deposit or loan and adding the interest accrued across preceding periods.

Capital Investment

involves the procurement of funds or physical assets with the anticipation of generating future returns or growth in value.

Net Cash Flows

The difference between a company’s total cash inflows and outflows over a specific period, indicating its ability to generate cash.