If a large country imposes a tariff:
A) the imported product price rises by more than the tariff.
B) the imported product price rises by exactly the amount of the tariff.
C) the imported product price rises by less than the amount of the tariff.
D) the imported product price falls by the amount of the tariff.
E) the effects are same as for a small country.

Question

Quizplus · Accepted Answer

When a large country imposes a tariff, it can influence world prices. The price of the imported product in the domestic market rises by less than the tariff because the foreign exporters may lower their prices to maintain competitiveness.

If a Large Country Imposes a Tariff