Correct Option: C. Newly set-up industries Explanation of the Correct Answer: The infant industry argument is a key concept in international trade theory, particularly relevant to developing countries. It suggests that new or "infant" industries in these countries may require temporary protection from foreign competition to grow and become competitive. Here’s a detailed breakdown of why option C is correct:

1. Definition of Infant Industry: An infant industry is a newly established industry that is not yet able to compete with established foreign competitors. These industries often lack the experience, economies of scale, and technological advancements that more mature industries possess.
2. Need for Protection: Developing countries may impose tariffs (taxes on imports) to protect these nascent industries from foreign competition. The rationale is that without protection, these industries may struggle to survive against established foreign firms that can offer lower prices or better quality products.
3. Benefits of Protection:
4. Time to Grow: Tariffs provide a buffer period during which the infant industry can develop its capabilities, improve its production processes, and gain market share.
5. Investment Attraction: Protection can attract both domestic and foreign investment into the industry, as investors may feel more secure knowing that they are shielded from immediate competition.
6. Job Creation: By supporting local industries, tariffs can help create jobs and stimulate economic growth within the country.
7. Long-term Goals: The ultimate goal of protecting infant industries is to enable them to become competitive in the global market. Once they have matured and can compete effectively, the tariffs can be reduced or eliminated.

Explanation of Why Other Options Are Incorrect:

• Option A: Industries producing baby food and clothing: This option is misleading because it specifies particular products rather than the concept of newly established industries. The infant industry argument applies broadly to any new industry, not just those producing specific goods like baby food or clothing.
• Option B: Industries owned by infants: This option is incorrect because it misinterprets the term "infant." In economic terms, "infant" refers to the stage of development of the industry, not the ownership. Industries are not owned by infants (children); rather, they are industries that are in their early stages of development.
• Option D: Industries in which infants will be taken care of: This option is also incorrect as it suggests a focus on industries related to childcare or services for infants, which is not the essence of the infant industry argument. The argument is about protecting new industries in general, not those specifically related to infants or childcare.

Summary of Key Points:

• The infant industry argument supports the protection of newly established industries in developing countries through tariffs.
• Protection allows these industries time to grow, attract investment, and create jobs.
• The goal is to enable these industries to become competitive in the global market over time.
• Misinterpretations of "infant" can lead to confusion; it refers to the stage of industry development, not ownership or specific products.

This understanding of the infant industry argument is crucial for grasping the broader implications of trade policy in developing economies.