Th4.1: Infant Industry Argument Flashcards
1
Q
What is an infant industry?
A
one that is just being established within a country
2
Q
Why will infant industries AC be higher?
A
they need to be able to build up a reputation and customer base will have to cover a lot of sunk costs
3
Q
Therefore the industry would be unable to compete in the international market, so…
A
the government protect them until they are able to compete on an equal level
4
Q
Why does this tend to be ineffective?
A
as firms grow to be inefficient and the government tend to have a poor record of ‘picking winners’
5
Q
There could be other more effective methods, such as…
A
subsidies
