The "optimum tariff rate" for a country is that rate which, assuming no retaliation,
A) maximizes the country's terms of trade.
B) maximizes the country's quantity of imports.
C) maximizes the country's balance of trade
D) maximizes the country's welfare.

Question

Quizplus · Accepted Answer

The "optimum tariff rate" is the rate that maximizes the country's welfare. This means that the tariff rate should be set at a level that generates the greatest possible net benefit to the country, taking into account both the gains from increased revenue and the losses from reduced consumer surplus. Maximizing terms of trade, quantity of imports, or balance of trade may not necessarily lead to the greatest overall benefit to the country.

The "Optimum Tariff Rate" for a Country Is That Rate