When We Compare a Tariff Levied on an Import Where

question 17

Multiple Choice

When we compare a tariff levied on an import where the home firm is a monopoly with an import tariff where the home firms are competitive, we find:

• A) the exact same result-both the monopolist and the competitive firm charge the world price plus the tariff and both firms produce a quantity where MC = MR = world price plus the tariff.
• B) that the monopoly firm will be able to charge a higher price and limit its quantity.
• C) that the competitive firm will not be able to survive the impact of the tariff.
• D) the monopoly firm will pay its workers less and earn higher profits.

---

Definitions:

Depression

A severe and prolonged downturn in economic activity, characterized by significant declines in GDP, high unemployment, and deflation.

Money Demand

The total amount of money that households and businesses want to hold at any given time, depending on interest rates, income levels, and economic activity.

Price Level

An index that measures the average of prices of goods and services in an economy, often used to evaluate inflation or deflation.

Money Demand Curve

A graphical representation showing the relationship between the quantity of money people want to hold and the interest rate, under the assumption all other factors remain constant.