A problem encountered when implementing an "infant industry" tariff is that
A) domestic consumers will purchase the foreign good regardless of the tariff.
B) special interest groups 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.

Question

Quizplus · Accepted Answer

Implementing an "infant industry" tariff involves protecting a new industry by imposing tariffs on imported goods in the same sector. The goal is to allow the domestic industry time to develop and grow to the point where it can compete with the established foreign industry. However, a problem with this approach is that if the industry does not mature and become competitive, special interest groups may prevent the removal of the tariff. This can ultimately hurt domestic consumers who will continue to pay higher prices for the protected good.

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