Protection

Question 1

define protection

Answer 1

protection is an artificial benefit given to domestic firms by the government in order to give them an advantage over international competitors

Question 2

arguments for protection

Answer 2

infant industry argument - startup
prevention of dumping
domestic employment
defence

Question 3

types of protection

Answer 3

tariffs
quotas
subsidies
local content rules
export incentives

Question 4

explain infant industry argument

Answer 4

new businesses find it hard to start up and compete against big international companies, protection allows domestic companies to startup

Question 5

define dumping

Answer 5

dumping occurs when foreign businesses sell their goods in another market at below cost prices in order to dispose of a surplus, establish market control. Once the local competition is eliminated the foreign producer raises prices again

Question 6

explain the difference between the short-run and long-run impacts of removal of protection on unemployment

Answer 6

removal of protection will cause some industries which do not have a comparative advantage to shut down and close which will cause unemployment in the short-run however the expanding of firms and businesses which have a comparative advantage will lead to an increase of jobs and an increase in employment
(reallocation of labour to more efficient industries)

Question 7

explain the defence argument for protection

Answer 7

a nation would not wish to become reliant on other nations for providing its defence equipment