If a country imposes a $10 tariff on a foreign monopolist, the price
Received by the monopolist, net of the tariff, will:

Question

Quizplus · Accepted Answer

If the foreign monopolist is able to pass on the entire tariff increase to the consumers, then the price paid by the consumers will rise by $10. However, if the foreign monopolist faces competition in the domestic market, then it will have to absorb some part of the tariff increase to keep its prices competitive. In that case, the net price received by the monopolist will fall by less than $10. Therefore, option B is the best choice.

If a Country Imposes a $10 Tariff on a Foreign