Economics · International Economics
According to the optimal tariff theory, a large nation can potentially increase its economic welfare by imposing a tariff because:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Tariffs always increase domestic producer surplus beyond social loss
- 2The country can influence world prices and improve its terms of trade✓
- 3Protectionism always leads to efficient import substitution
- 4Tariffs generate government revenue without market distortions
Correct answer
The country can influence world prices and improve its terms of trade
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