Simple logical conclusion international economics
Suppose Thailand does not have a watch industry yet whereas Switzerland already takes advantage of external economics of scale.
a) Which approach of the Thai Government would you think is the more apporpiate and WHY?
- Subsidize a starting watch industry, no barriers to trade.
- Stop imports of watches and allow a local industry to develop
- Or no Intervention
b) Suppose a Swiss producer decides to take advantage of the lower variable cost in Thailand and invest in a factory there. Would this be a profitable move if external economies arise for some reason from proximity to other producers; what if they arise from the accumulation of knowledge?
c) Discuss briefly the infant industry argument in the above context else. What else could a government do beside subsidizing or creating trade barriers in order to support a new industry?
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Hybrid Mode
