In world of two "large" countries, if one country imposes a tariff, the welfare of the Tariff-imposing country will definitely improve (assuming no retaliation) if, the tariff-Imposing country
A) is trading, both before and after the imposition of the tariff, in the "elastic" portion of Its trading partner's offer curve.
B) is trading, both before and after the imposition of the tariff, in the "inelastic" portion Of its trading partner's offer curve.
C) is putting the new tariff on top of an already existing tariff rate that is greater than the "optimum" tariff rate.
D) puts on a prohibitive tariff.

Question

Quizplus · Accepted Answer

When a country is trading in the "inelastic" portion of its trading partner's offer curve, the imposition of a tariff can improve the welfare of the tariff-imposing country. This is because the trading partner's demand for imports from the tariff-imposing country is relatively inelastic, meaning that the trading partner will continue to buy almost the same amount of goods despite the higher price due to the tariff. This allows the tariff-imposing country to collect tariff revenues without a significant reduction in the quantity of exports.

In World of Two "Large" Countries, If One Country Imposes