A Problem Encountered When Implementing an "Infant Industry" Tariff Is

question 45

Multiple Choice

A problem encountered when implementing an "infant industry" tariff is that:

• A) Domestic consumers will purchase the foreign good regardless of the tariff
• B) Political pressure may prevent the tariff's removal when the industry matures
• C) Most industries require tariff protection when they are mature
• D) Labor unions will capture the protective effect in higher wages

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Definitions:

Breakeven Interest Rate

The interest rate at which the cost of borrowing equals the income from an investment, resulting in no profit or loss.

Flotation Costs

Expenses incurred by a company in issuing new securities, including underwriting fees, legal fees, and registration fees, affecting the net proceeds from the offering.

Maturity Value

The amount that will be paid to the holder of a financial instrument at its maturity date.

Bought Deals

An arrangement in which an investment bank buys an entire new issue of securities from a company and resells it to investors.