If a large country imposes a tariff:
A) its economic welfare may increase.
B) its economic welfare must always fall.
C) its economic welfare will increase if its deadweight losses exceed gains from its terms-of-trade effect.
D) the tariff will have the same impact as an identical tariff imposed by a small country.

Question

Quizplus · Accepted Answer

A large country may benefit from a tariff if it is able to reduce competition from foreign producers and support domestic industries, leading to increased domestic production and employment. This can result in increased economic welfare for the country. However, the effectiveness and impact of the tariff will depend on various factors such as the size of the tariff, the elasticity of demand for the product, and the response of foreign producers. Therefore, it is not always guaranteed that imposing a tariff will result in increased economic welfare, and the impact may differ from that of a small country.

If a Large Country Imposes a Tariff