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    Infant industry argument

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    Suppose that the production technology of a self-proclaimed "infant industry" permits economies of scale. Suppose also that the same technology is available to foreign producers.

    Is there a valid argument for protection in this situation from the perspective of the world as a whole? Why or why not?

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    The infant industry argument is used to justify the use of tariffs and subsidies for domestic industries. Infant industries are so-called because they are just beginning. Economies of scale usually do not exist for them, because it takes time to develop efficiency. For example, a new phone company wouldn't have economies of scale ...

    Solution Summary

    The solution discusses the "infant industry."