If the Infant Industry Argument Is Used to Protect an Industry

question 18

Multiple Choice

If the infant industry argument is used to protect an industry that has already matured, then

• A) consumers lose because they will pay a price for a product that is above the world price.
• B) consumers lose because they will pay a price for a product, which is less than the world price.
• C) stockholders lose because the firm cannot compete with other firms.
• D) no one loses.

---

Definitions:

Statement of Cash Flows

A financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents.

Liquidity Ratios

Measures of a firm’s ability to meet its short-term obligations.

Short-Term Obligations

Financial liabilities that are due to be paid within a short timeframe, typically less than one year.

Activity Ratios

Measures of how efficiently a firm utilizes its assets.