Paper 2 · International Trade
Protecting a new domestic industry with a tariff is usually justified on the ground that
Athe industry needs time to grow before it can meet foreign competition
Bconsumers would rather pay a higher price for imported goods
Cthe industry pays no company tax while the tariff is in place
Dforeign producers will lower their own prices in response to it
Explanation: This is the infant industry argument. A young firm has not yet reached the scale at which its average costs fall to the level of established foreign rivals, so a temporary tariff shelters it until it can compete unaided. The case rests on the protection being temporary.
Derived from ZIMSEC Economics 4050/2 Paper 2, June 2023, Q2