Economics · International Trade Theory
The 'Optimum Tariff' argument for trade intervention is valid ONLY for:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1A small country that is a price-taker in world markets, since it can exploit its monopsony power to improve welfare.
- 2A large country that has sufficient market power to improve its terms of trade by restricting imports, provided trading partners do not retaliate.✓
- 3All countries, because any restriction on imports generates government revenue that can offset the deadweight loss.
- 4Developing countries exclusively, as their infant industries need protection from established foreign competitors.
Correct answer
A large country that has sufficient market power to improve its terms of trade by restricting imports, provided trading partners do not retaliate.
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