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:

Long Equity

An investment strategy where investors purchase stocks or equity securities with the expectation that their value will increase over time.

Hedge Fund

A private investment partnership that uses complex strategies and various instruments to achieve high returns.

Long-Short Hedge Fund

An investment fund strategy that aims to generate returns by taking long positions in undervalued securities and short positions in overvalued securities.

Short Selling

The practice of selling securities or other financial instruments that are not currently owned, and subsequently repurchasing them at a lower price.