Rishi, a protectionist, has seen several small businesses go bankrupt because they were unable to compete with the cheaper prices of goods provided by foreign companies. The cell-phone manufacturing industry has just started in the United Kingdom, and Rishi's company is one of the first to try its hand at cell-phone manufacturing. What argument is most likely to be used by Rishi to persuade his government to restrict the import of foreign cell phones from foreign companies?

Question

Brenna Cunningham

Business

29 May, 07:22

Rishi, a protectionist, has seen several small businesses go bankrupt because they were unable to compete with the cheaper prices of goods provided by foreign companies. The cell-phone manufacturing industry has just started in the United Kingdom, and Rishi's company is one of the first to try its hand at cell-phone manufacturing. What argument is most likely to be used by Rishi to persuade his government to restrict the import of foreign cell phones from foreign companies?

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Answers (1)

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Justin Bell · Answer 1

Key infant industries must be protected, specially those that operate with new technologies.

Explanation:

It takes time for infant industries to develop certain comparative advantages that allows them to compete against foreign firms. While they are developing their own comparative advantages, infant industries can easily go out of business due to foreign competitors that have been around for much longer.

In order to achieve competitive prices, infant industries must first achieve economies of scale. While foreign firms are already able to offer low prices because they are able to produce with lower costs.