The United States applies a 25% tariff on imported pickup trucks (mainly from Japan). If the United States is considered to be a "large" country, then:

Question

Quizplus · Accepted Answer

When a large country applies a tariff, the quantity of imports decreases and the domestic price increases. However, the increase in price is less than the tariff rate because the decrease in import quantity decreases the market power of foreign producers, and the domestic market becomes less competitive. Therefore, the U.S. price of imported Japanese pickup trucks will increase by less than 25%.

The United States Applies a 25% Tariff on Imported Pickup