The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S.Figure 21.4

-If an infant industry truly has a good chance to become competitive and produce profitably once it is well established, it is not at all clear that government should even offer protection to reduce short-run losses.

Question

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S.Figure 21.4
 
-If an infant industry truly has a good chance to become competitive and produce profitably once it is well established, it is not at all clear that government should even offer protection to reduce short-run losses.

Quizplus · Accepted Answer

This statement is consistent with the argument against government protectionism based on the infant industry argument. The argument suggests that the government should not provide protection to industries that cannot become competitive and profitable in the long run, but may experience short-run losses during the process of establishing themselves. However, if an industry has the potential to become competitive and profitable in the future, it may not need government protection to survive.

The Figure Below Shows the Demand (D) and Supply (S)