A defining characteristic of a "small nation" relative to a "large nation" with respect to identifying the welfare effects of a tariff is that the:
A)small nation has less land mass than a large nation
B)small nation cannot influence world price of imported goods as much as a large nation can
C)small nation has a smaller trade deficit than the large nation
D)small nation has a smaller population compared to a large nation

Question

Quizplus · Accepted Answer

A small nation typically has less bargaining power in the world market and cannot influence the world price of imported goods as much as a large nation can. As a result, the welfare effects of a tariff are likely to be more significant for a small nation compared to a large nation. The other options are not necessarily defining characteristics of a small nation relative to a large nation with respect to identifying the welfare effects of a tariff.

A Defining Characteristic of a "Small Nation" Relative to a "Large