The imposition of an optimum tariff by a large nation:
A)improves its terms of trade
B)reduces the volume of trade
C)increases the nation's welfare
D)all of the above

Question

Quizplus · Accepted Answer

An optimum tariff imposed by a large nation can improve its terms of trade by lowering the price of its imports relative to its exports, reduce the volume of trade by making imports more expensive and thus less attractive, and increase the nation's welfare by capturing some of the gains from trade that would otherwise accrue to foreign producers.

The Imposition of an Optimum Tariff by a Large Nation