Question
Consider a large country that imports good R . Some of the total quantity of R domestically consumed is supplied by domestic producers and the
Consider a large country that imports good R. Some of the total quantity of R domestically consumed is supplied by domestic producers and the rest of it is imported. Then suppose that the government imposed a tariff on each unit of R that is imported, so that the quantity of R imported is somewhat reduced. Draw a demand and supply diagram that shows the effect of the tariff. On your diagram, shade-in the area that represents the increase in producer surplus. Discuss why it would be naive (simple minded) to regard this large-country case as a legitimate justification for protectionism.
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