4. (8) Why is it necessary to use a market failure to justify the use of infant industryprotection?25. (8) What is a positive externality? Explain the argument of knowledge spilloversas a potential reason for infant industry protection.6. (6) If infant industry protection is justified, is it better for the Home country to usea tariff or a quota, and why?

Since you have asked multiple question, we will solve the first question for you. If you want any specific question to be solved then please specify the question number or post only that question. In economics, an infant industry is a nascent industry that faces relative difficulties or is completely incapable of competing with established international competitors in its early stages. Governments are sometimes asked to aid the growth of infant industries by providing subsidies or tariffs to protect domestic industries in their early stages. Subsidies can be indirect, such as when import duties or a limitation on the import of a raw or finished material are enforced. In order to defend the American textile sector, the US Congress imposed taxes on a range of imports, including cotton, leather, and other types of clothing. Economists argue that government funding for startups is only appropriate if there are external advantages.If we compare the economies of scale and technology used by infant industries to their larger foreign counterparts, we can see that the former is at a disadvantage. As a result, the domestic country must protect them, or the citizens' innovation and entrepreneurship will cease. An economic justification for trade protectionism is the baby industry argument. The primary premise is that emerging industries generally lack the economies of scale that older competitors from other nations do, and hence must be safeguarded until they can achieve equal economies of scale. The idea behind the claim is that trade protectionism is expensive in the short run but beneficial in the long run.

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4. (8) Why is it necessary to use a market failure to justify the use of infant industry protection?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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