Infant industry argument:

• What is an infant industry?

  An infant industry is one that is just being established within a country.
• Why do infant industries need to build up a reputation and customer base?

  To become competitive in the market.
• What are sunk costs in the context of infant industries?

  Sunk costs are costs that have already been incurred and cannot be recovered.
• How do sunk costs affect the average cost (AC) for infant industries?

  Sunk costs lead to higher average costs for infant industries.
• Why are infant industries unable to compete in the international market?

  Because their average costs are higher due to sunk costs.
• What role does the government play in supporting infant industries?

  The government protects them until they can compete on an equal level.
• How has the protection of infant industries worked in Japan?

  It has worked well in Japan.
• What is a general criticism of protecting infant industries?

  It tends to be ineffective as firms grow to be inefficient.
• What is meant by the government having a poor record of ‘picking winners’?

  It means the government often fails to identify which industries will succeed.
• What are some alternative methods to support infant industries mentioned in the text?

  Subsidies are mentioned as a more effective method.