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By the end of this section, you will be able to:

  • Explain and analyze various arguments that are in support of restricting imports, including the infant industry argument, the anti-dumping argument, the environmental protection argument, the unsafe consumer products argument, and the national interest argument
  • Explain dumping and race to the bottom
  • Evaluate the significance of countries’ perceptions on the benefits of growing trade

As previously noted, protectionism requires domestic consumers of a product to pay higher prices to benefit domestic producers of that product. Countries that institute protectionist policies lose the economic gains achieved through a combination of comparative advantage, specialized learning, and economies of scale. With these overall costs in mind, let us now consider, one by one, a number of arguments that support restricting imports.

The infant industry argument

Imagine Bhutan wants to start its own computer industry, but it has no computer firms that can produce at a low enough price and high enough quality to compete in world markets. However, Bhutanese politicians, business leaders, and workers hope that if the local industry had a chance to get established, before it needed to face international competition, then a domestic company or group of companies could develop the skills, management, technology, and economies of scale that it needs to become a successful profit-earning domestic industry. Thus, the infant industry argument for protectionism is to block imports for a limited time, to give the infant industry time to mature, before it starts competing on equal terms in the global economy. (Revisit Macroeconomic Policy Around the World for more information on the infant industry argument.)

The infant industry argument is theoretically possible, even sensible: give an industry a short-term indirect subsidy through protection, and then reap the long-term economic benefits of having a vibrant, healthy industry. Implementation, however, is tricky. In many countries, infant industries have gone from babyhood to senility and obsolescence without ever having reached the profitable maturity stage. Meanwhile, the protectionism that was supposed to be short-term often took a very long time to be repealed.

As one example, Brazil treated its computer industry as an infant industry from the late 1970s until about 1990. In an attempt to establish its computer industry in the global economy, Brazil largely barred imports of computer products for several decades. This policy guaranteed increased sales for Brazilian computers. However, by the mid-1980s, due to lack of international competition, Brazil had a backward and out-of-date industry, typically lagging behind world standards for price and performance by three to five years—a long time in this fast-moving industry. After more than a decade, during which Brazilian consumers and industries that would have benefited from up-to-date computers paid the costs and Brazil’s computer industry never competed effectively on world markets, Brazil phased out its infant industry policy for the computer industry.

Questions & Answers

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it is a Price at which there is no tendency for both the quantity demanded and quantity supplied to change.
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joint demand?
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The Four Asian Tigers, Four Asian Dragons or Four Little Dragons, are the economies of Hong Kong, Singapore, South Korea and Taiwan, which underwent rapid industrialization and maintained exceptionally high growth rates between the early 1960s and 1990s.
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Foday
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Lamin
gross domestic product
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Birungi
Inflation is defined as the rise in price of a commodity.
Nureni Reply
It is defined as the rise in price of a commodity.
Nureni
the persistent rise in the prices of goods and services. or commodities.
SULEIMAN
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Yarouh
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Allen
gross domestic product
Annor
GDP stands for Gross Domestic Product
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HlobisileM
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MiXUP Reply
Maxima s below equilibrium. Whilst minima s above. Equilibrium
Afran
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is the willingness and the ability of a consumer to purchase goods at a given price and at a particular point in time.
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Afran
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3 Reasons.. 1... diminishing marginal utility 2... substitution effect 3...income effect
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Because of the negative or inverse relationship between price and quantity demanded
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Assan
The law states that all other things being equall as much of variable factor(labour) is employed on fixed factor(land) the marginal product rises..attain a maximum and begins to fall.
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Monetary policy is an attempt to influence the economy by opera ting in such monetary variables
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the branch of economics concerned with large-scale or general economic factors, such as interest rates and national productivity.
idk
in other words it is the study of the economic as a whole
idk
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Economic growth is the process whereby the real per capita income of an economy increases over a long period of time.
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Economics is defined by Lionel Robbins as a social science which studies human behaviour as a relationship between ends and scarce means which have alternative uses
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Helps in decision making
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MP
it helps an individual in rational decision making process
Assan
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if an individual is faced with unlimited wants.
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it also helps an individual in arranging their wants in order of their importance.
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forgive Reply
Tourism is travel for pleasure or business
Yusuf
It is the commercial organization and operation of holidays and visits to places of interest.
Nureni
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sam Reply
A price taker is a person or a company who have no control to dictate a prices of a goods or services
Unique
Someone who sets price
Nureni
In the trading world, a price taker is a trader who does not affect the price of the stock if he or she buys or sells shares.
Nureni
A price taker refers to a firm or an individual who sets the price of his good and services based on an external factor. In other words he cannot choose and set a price by himself. An example is a firm operating in perfect competition where prices are set through the price mechanism.
Tba
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Unique Reply
The higher the satisfaction derived from a particular commodity,the lower the demand for it but that law doesn't match in some instances.
Nureni
state the features of an imperfect competitive market
Naomi
@NURENI instance like wat
Unique
imperfect competitive market involves large number of sellers and buyers price makers selling cost product differentiation free entry and exit of a firms
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Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
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