Economists Believe the Most Persuasive Argument for Protectionism Is to Protect

question 26

Multiple Choice

Economists believe the most persuasive argument for protectionism is to protect infant industries.But the argument has a drawback.What is this drawback?

• A)Governments always make the level of protection for infant industries too high.
• B)Governments are usually too impatient and do not allow protection to remain in place long enough to allow industries to be competitive in international markets.
• C)Governments usually use tariffs, rather than quotas, to protect infant industries in order to collect tariff revenue. (Quotas do not result in government revenue).
• D)Protection lessens the need for firms to become productive enough to compete with foreign firms; this often results in infant industries never "growing up."

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Definitions:

Optimal Number

The best or most favorable amount of something in terms of efficiency or success.

Free-rider Problem

A situation in which individuals consume a good without paying for it, relying on others to bear the cost, which can lead to underprovision of the good.

Private Good

A product or service that is excludable and rivalrous, meaning its use by one individual prevents others from using it, and it can be kept exclusive to those who pay for it.

Marginal Cost

The rise in cost resulting from the manufacture of an additional unit of a product or service.