A major difficulty with the infant industry argument for protection is that

Question

Quizplus · Accepted Answer

The measurement of production externalities (positive spillover effects) is difficult and uncertain, making it challenging to determine the level of protection necessary for an infant industry. This uncertainty can lead to overprotection, which can ultimately harm the economy. The other choices are incorrect because A) government revenue may increase with a tariff, B) the infant industry argument does not necessarily require a large country case, C) effective rates of protection can be lower than nominal rates, and E) the productivity of infant industries can either increase or stabilize if appropriately protected.

A Major Difficulty with the Infant Industry Argument for Protection