Economics · International Trade and Tariffs
Under the large country assumption, when a nation imposes an optimal tariff, what is the net marginal welfare effect at the optimal tariff level on the importing country?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Positive due to terms of trade improvement
- 2Always negative due to deadweight losses
- 3Depends strictly on the elasticity of domestic demand
- 4Zero, as terms of trade marginal gains equal marginal efficiency losses✓
Correct answer
Zero, as terms of trade marginal gains equal marginal efficiency losses
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