The infant industry argument is that
A) comparative advantage is irrelevant to economic growth.
B) developing countries have a comparative advantage in agricultural goods.
C) developing countries have a comparative advantage in manufacturing.
D) developing countries have a potential comparative advantage in manufacturing.
E) developing countries have no chance to compete with industrialized countries.

Question

Quizplus · Accepted Answer

The infant industry argument is that developing countries have a potential comparative advantage in manufacturing, but they need protectionist policies such as tariffs and subsidies to support and develop their industries until they become mature enough to compete with established industries in developed countries. Option A is incorrect because comparative advantage is important for economic growth. Option B is partially correct, as developing countries may have a comparative advantage in agricultural goods as well, but it is not relevant to the infant industry argument. Option C is incorrect, as developing countries may not yet have a comparative advantage in manufacturing. Option E is incorrect, as the infant industry argument assumes that developing countries have the potential to compete with industrialized countries.

The Infant Industry Argument Is That