When a tariff is applied to a good exported by a foreign monopoly
(with no home producer), the increase in the equilibrium price is
________ the tariff applied.

Question

Quizplus · Accepted Answer

When a tariff is applied to a good exported by a foreign monopoly (with no home producer), the increase in the equilibrium price is less than the tariff applied. This is because the foreign monopoly has market power and can set the price higher than the price without the tariff. The tariff will reduce the quantity of imports, but the monopoly will still be able to charge a higher price, resulting in a smaller price increase than the tariff applied.

When a Tariff Is Applied to a Good Exported by a Foreign