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Industrial policy: theory
» Practice Questions
1. “Industrial policy” may be defined as ________________________________.
an objective effort by private firms to enhance an economy’s trade prospects
deliberate attempts by governments to subsidize different industries and firms to enhance economic development
the transformation of small firms to large firms via corporate merger
2. Which of the following is NOT an argument for industrial policy?
governments are always better than markets at engaging in economic calculation
the “infant industry” argument
knowledge spillovers and dynamic scale economies
3. Individuals in government may not be able to determine which sectors and firms will advance in an economy. This is known as the ______________________.
the knowledge problem
4. Which of the following is NOT a test of “successful” industrial policy?
the Mill test
the Kenney test
the Bastable test