1. What would be the ‘first-best’ solution to the problem of an infant industry not being able to compete with imports?\n2. Protection to allow the exp
1. What would be the ‘first-best’ solution to the problem of an infant industry not being able to compete with imports?
\r\n2. Protection to allow the exploitation of monopoly/monopsony power can be seen as a ‘first-best’ policy for the country concerned. Similarly, the use of tariffs to counteract externalities directly involved in the trade process (e.g. the environmental costs of an oil tanker disaster) could be seen to be a first-best policy. Explain why.