In the largecountry case, when a tariff is imposed, the country:
A)sees a termsoftrade gain.
B)is able to reduce world price of the imported good.
C)is going to experience an increase in consumer surplus.
D)sees a termsoftrade gain and is able to reduce world price of the imported good.

Question

In the large­country case, when a tariff is imposed, the country:
A)sees a terms­of­trade gain.
B)is able to reduce world price of the imported good.
C)is going to experience an increase in consumer surplus.
D)sees a terms­of­trade gain and is able to reduce world price of the imported good.

Quizplus · Accepted Answer

When a large country imposes a tariff, it reduces the quantity of imports and shifts the domestic supply curve to the right. This results in an increase in the domestic price of the imported good, which causes a terms-of-trade gain. Additionally, by reducing the quantity of imports, the country is able to reduce the world price of the imported good. Therefore, the best choice is D - the country sees a terms-of-trade gain and is able to reduce the world price of the imported good.

In the Large­country Case, When a Tariff Is Imposed, the Country

In the Largecountry Case, When a Tariff Is Imposed, the Country