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If the Home Nation Allows Free Trade but Imposes a Tariff

Question 38

Multiple Choice

If the home nation allows free trade but imposes a tariff on a product
Currently produced by a home firm monopoly, what is the outcome?


A) The home firm then will regain its monopoly control over the price.
B) The home firm will be able to charge a higher price (world price + tariff) , but it will become a price taker, just like a competitive firm.
C) The home nation's firm will be able to limit quantity and charge a higher price.
D) The monopoly firm will lower price, increase sales, and undercut the foreign competition.

Correct Answer:

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