An assumption behind the infant industry argument for tariff protection is that
A) foreign competitors are selling output below average cost.
B) the domestic industry will be facing an upward adjustment in its average cost.
C) the domestic industry will eventually gain comparative advantage in producing the good.
D) the market needs additional competition to satisfy consumer demand.

Question

Quizplus · Accepted Answer

The infant industry argument states that a domestic industry should be protected from foreign competition until it can achieve mature economies of scale and establish a comparative advantage in producing the good. Therefore, the assumption behind this argument is that the domestic industry will eventually gain a comparative advantage in producing the good.

An Assumption Behind the Infant Industry Argument for Tariff Protection