Suppose that a foreign monopolist supplies the entire domestic market
(there is no domestic production).The home country then applies a
$10 tariff on imports from the foreign monopolist.The home country
Will be better off if:

Question

Quizplus · Accepted Answer

The terms-of-trade gain refers to the increase in the domestic price of the imported good, which can benefit the home country. The deadweight loss refers to the inefficiency and loss of consumer and producer surplus that occurs due to the tariff. In order for the home country to be better off with the tariff, the terms-of-trade gain must be greater than the deadweight loss. Therefore, choice D is the correct answer.

Suppose That a Foreign Monopolist Supplies the Entire Domestic Market