If the Infant Industry Argument Is Used to Justify Protecting

question 20

Multiple Choice

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

• A) consumers will lose because the price they will pay is less than the world price.
• B) consumers will lose because the price they will pay is greater than the world price.
• C) stockholders lose because firms in infant industries cannot compete with firms in other industries.
• D) no one loses.

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Definitions:

Fixed Selling Expense

Costs associated with the selling process that do not vary with the level of sales, such as salaries of sales personnel and rent for sales space.

Variable Administrative Expense

Indirect costs that change in proportion with the level of a company’s production or sales activities.

Fixed Administrative Expense

Expenses that do not change with the level of production or sales over a certain period, related to the administration of a business.

Contribution Format

An income statement format that separates fixed and variable costs to show the contribution margin.