If a (large) country B puts an export tax on a good, and assuming that world demand for The export from B is not perfectly inelastic, then, because of the tax, the price of the good In country B will __________ and the price of the good on the world market __________.

Question

Quizplus · Accepted Answer

When a country puts an export tax on a good, it makes the price of the good in that country more expensive. This leads to a decrease in demand for that good, which then leads to a decrease in the price of that good on the world market. Therefore, the price of the good in country B will decrease (due to decreased demand), but the price of the good on the world market will increase (due to decreased supply).

If a (Large) Country B Puts an Export Tax on a Good