The Imposition of an Import Tariff by a Small Nation

question 4

Multiple Choice

The imposition of an import tariff by a small nation:

• A)increases the relative price of the import commodity for domestic producers and consumers
• B)reduces the relative price of the import commodity for domestic producers and consumers
• C)increases the relative price of the import commodity for the nation as a whole
• D)any of the above is possible

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Definitions:

Perfectly Elastic

A situation in economic theory where the quantity demanded or supplied of a good changes infinitely in response to any change in price.

Demand Curve

A diagram depicting how the demand for an item varies with its price, generally characterized by a downward trajectory.

Marginal Revenue

The additional earnings gained by selling an extra unit of a good or service.

Marginal Cost

Expenses incurred in creating one more unit of a product.