An Assumption Behind the Infant-Industry Argument for Tariff Protection Is

question 197

Multiple Choice

An assumption behind the infant-industry argument for tariff protection is that

• A) foreign competitors are selling output below average cost.
• B) the domestic industry will be facing an upward adjustment in its average cost.
• C) the domestic industry will eventually gain a comparative advantage in producing the good.
• D) the market needs additional competition to satisfy consumer demand.

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Definitions:

Price Skimming

A pricing strategy where a firm charges the highest initial price that customers will pay for a new product or service, then gradually lowers the price to attract more price-sensitive consumers.

Penetration Pricing

A marketing strategy where the initial price of a product is set lower than the eventual market price to attract new customers and gain market share.