Dalton, Georgia, a town with a population less than 35,000, has developed into a leading producer of carpets, despite its small size
Some government officials argue that the success achieved by firms in Dalton in developing a comparative advantage in carpet making because of external economies can be used to justify trade barriers as a means to protect an "infant industry." After an infant industry gains experience it can compete in international markets and the trade barriers can be removed. What objections do economists make to this argument in favor of trade barriers?
Many economists believe that this is the most persuasive argument for protection but experience teaches us that tariffs and quotas can stifle the incentive firms have to become more efficient producers, which is the reason for imposing trade restrictions in the first place. Few firms volunteer to have trade restrictions removed once they have been established.
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In terms of the marginal product of labor, how much labor is needed to produce one more unit of output? If the cost of that labor is w, then how much does one more unit of output cost to produce? If a firm is a perfectly competitive profit maximizer, show why they produce where w equals the marginal revenue product of labor.
What will be an ideal response?
The real-balance effect refers to
A) the real interest rate. B) the production of real goods and services as opposed to financial instruments. C) the prices of goods and services. D) the real value of cash balances that a person is holding.
The political attractiveness of tariffs, quotas, and other trade restrictions is primarily the result of
What will be an ideal response?
According to the text, if diamonds represent a form of conspicuous consumption, then
A. they should be taxed. B. they should be outlawed. C. they should be given for free. D. they should be subsidized.