Suppose that a large country imposes optimal tariffs on imports
From another large country.The second country then responds
With optimal tariffs on imports from the first country.For these
Two countries, the Nash equilibrium results in ___________ for
The first country and __________ for the second country.
A)losses; losses
B)gains; gains
C)losses; gains
D)gains; losses

Question

Quizplus · Accepted Answer

In a Nash equilibrium with both countries imposing optimal tariffs, both countries experience losses due to retaliatory tariffs, which reduce trade efficiency and overall welfare.

Suppose That a Large Country Imposes Optimal Tariffs on Imports