Compare the effects on world prices for an export tariff in a small country with an export tariff in a large country.
A) An export tariff in a small country and an export tariff in a large country both increase the world price by the amount of the tariff.
B) An export tariff in a small country does not change the world price, while an export tariff in a large country increases the world price.
C) An export tariff in a small country increases the world price, while an export tariff in a large country has no effect on the world price.
D) Neither an export tariff in a small country nor an export tariff in a large country has any effect on the world price.

Question

Quizplus · Accepted Answer

An export tariff in a small country does not significantly affect the world price because the country's share in the global market is too small to influence global supply and demand dynamics. In contrast, a large country imposing an export tariff can affect the world price because its share in the global market is significant enough to alter global supply, potentially increasing world prices due to reduced availability of the exported good.

Compare the Effects on World Prices for an Export Tariff