Consider the case of a Foreign monopoly with no Home production, shown in Figure 9-7. Starting from free trade at point A, consider a $5 tariff applied by the Home government.

Price Increase in P is less than t, the increase in MC P 2 Feenstra/Taylor, International Trade, 5e @ 2021 Worth Publishers P3 = P2 - t B MC * + t Increase in MC due to tariff, t MC* A D MR X2 X1 Foreign exports