1. The -industry argument is often given to provide a rationale for tariffs for new firms.
2. Knowledge gained during production is known as by doing.
3. If only one firm can exist in a market, a government may try to subsidize the firm so that the country can share in the profits
4. In the 1950s and 1960s, countries in used tariffs and other policies to nurture domestic industries.
5. Learning By Doing? An industry has been operating for 10 years under protection. The government wants to remove the trade protection, but the industry claims that it needs the protection because of learning by doing. Evaluate its claim. Can you think of a circumstance where it could be true?
6. Two Countries Fighting Over Airplane Production. Suppose there are monopoly profits in the production of airplanes, but two countries are each determined to capture the industry. When one country subsidizes its domestic firm, the other country matches the tactic. As a result, both firms stay in business. Who gains and who loses? Consider the effects on the firms, consumers, and taxpayers.
7. Unfair Competition. We are amused by candle makers asking for protection from the sun under the guise of unfair competition. How does this differ from U.S. producers of clothing claiming there is unfair competition from low-wage countries?