What will happen to domestic and world prices when a large country imposes an export tariff?
A) The world price will increase and the domestic price will decrease.
B) Both the world price and the domestic price will increase
C) The world price will decrease and the domestic price will increase.
D) Both the domestic price and world price will decrease.

Question

Quizplus · Accepted Answer

The world price will increase because the export tariff makes it more expensive for domestic producers to export goods, reducing the supply of goods available for export. The domestic price will decrease because the export tariff reduces the demand for domestically produced goods, as consumers are less willing to pay a higher price for goods that are subject to an export tariff.

What Will Happen to Domestic and World Prices When a Large