Carefully explain how the imposition of a tariff is different for a large country (that can affect the world price) than a small country
What will be an ideal response?
For a small country, imposition of a tariff unambiguously reduces total benefits to the country. For a large country, the effect is less clear. Since a large country can have an impact on the world price, the reduction in domestic demand due to the tariff may be sufficiently large to cause the world price to fall or to encourage foreign producers to reduce their prices to avoid losing market share. In this case, while domestic producers still gain and domestic consumers still lose, the overall benefits to the country may or may not fall. If the fall in the world price is sufficient, foreign producers are essentially paying for much of the tariff in the form of lower prices, and this gain may exceed the deadweight losses.
You might also like to view...
Explain how redistributing income creates a deadweight loss
What will be an ideal response?
In explaining the evolution of money
A) government regulation is the most important factor. B) commodity money, because it is valued more highly, tends to drive out paper money. C) new forms of money evolve to lower transaction costs. D) paper money is always backed by gold and therefore more desirable than checks.
Decisions by ________ about their holdings of currency and by ________ about their holdings of excess reserves affect the money supply
A) borrowers; depositors B) banks; depositors C) depositors; borrowers D) depositors; banks
As of 2015, approximately what percentage of U.S. firms are sole proprietorships?
A. 84 percent. B. 50 percent. C. 72 percent. D. 18 percent.