There are several conditions that justify limiting imports to ensure the
Survival of the "infant industry," and to justify government protection.
Which of the following is(are) a justification?
I.Knowledge spillovers should be likely.
II.Protected firms should have a good chance of moving down along
Their average cost curves over time to become competitive at world
Prices.
III.Protected firms should have a good chance to reduce future costs
And cause their average cost curves to shift downwards.

Question

Quizplus · Accepted Answer

Knowledge spillovers (I) are a key factor in justifying protectionism for infant industries, as they can lead to dynamic gains for the economy as a whole. Additionally, protected firms should have a good chance to reduce future costs and shift their average cost curves downwards (III), which supports the argument for temporary protection until firms can compete on their own. While it is desirable for protected firms to eventually move down their average cost curves to become competitive at world prices (II), this is not always possible and is not a necessary condition for justifying protectionism.

There Are Several Conditions That Justify Limiting Imports to Ensure