ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -An infant industry can be protected by imposing tariffs on imports. A tariff is a tax or duty on the volume of imports. Tariffs can either be (1) a fixed dollar charge for each unit imported or (2) a percentage tax levied on the value of the imported good.

Detailed explanation-2: -The infant industry argument is an economic rationale for trade protectionism. The core of the argument is that nascent industries often do not have the economies of scale that their older competitors from other countries may have, and thus need to be protected until they can attain similar economies of scale.

Detailed explanation-3: -A government planner can protect the infant industry using domestic production subsidies, tariffs, or quotas in order to maximize domestic welfare over time.

Detailed explanation-4: -The protection of infant industries by a nation’s government can cause more economic harm than good. The main cultural motive behind government intervention in trade includes protection of domestic jobs. Unwanted cultural influence in a nation can cause governments to block imports that it believes are harmful.