Future Business Leader Achievments (FBLA) Economics Practice Exam

A country that justifies tariffs on an imported good by appealing to infant industry arguments is trying to

1. avoid the problems of increasing costs

2. gain an absolute advantage in the production of that good

3. gain time to become efficient and competitive

4. increase its imports of that good

The correct answer is: gain time to become efficient and competitive

The reasoning behind selecting the option relating to gaining time to become efficient and competitive highlights the purpose of infant industry arguments. When a country imposes tariffs on imported goods to protect emerging industries, the goal is to provide these nascent industries with a temporary shield from international competition. This protection allows them the necessary time to develop their production capabilities, innovate, and ultimately improve their competitiveness in the global market. By doing this, the country hopes that over time, these "infant" industries will grow strong enough to withstand competition from foreign producers without the need for tariff protection. This process often involves enhancing production techniques, increasing economies of scale, or achieving greater efficiencies that would allow these industries to thrive independently in the future. The other choices reflect different economic concepts that do not accurately represent the infant industry rationale. For instance, increasing costs typically refers to the negative consequences of protectionist measures rather than their benefits. Gaining an absolute advantage pertains to producing a good more efficiently than others, which diverges from the foundational idea of giving time for new industries to establish themselves. Lastly, increasing imports contradicts the essence of tariffs, as the intent is generally to reduce imports by making foreign goods less competitive compared to domestic production.