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Using a domestic-market demand- and supply-curve graph, (a)show the impact of tariff on a large country's import price, domestic demand, domestic supply, import quantity, consumer
Using a domestic-market demand- and supply-curve graph,
(a)show the impact of tariff on a large country's import price, domestic demand, domestic supply, import quantity, consumer surplus, producer surplus, government revenue, and total welfare;
(b)Is the country unambiguously worse off as a result of the tariff?
(c)Identify the terms of trade gain in the graph; explain the cause of the gain.
(d)What determines the magnitude of the gain and thus the level of optimal tariff?
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