Suppose That There Is No Home Production of a Good

question 89

Multiple Choice

Suppose that there is no home production of a good (imports supply all home demand) . If the home country then applies a tariff to this good exported by a foreign monopoly, the increase in the equilibrium home price is ________ the tariff applied.

• A) more than
• B) less than
• C) the same as
• D) more than twice as much as

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Definitions:

Theory of Profit-maximizing

A principle that suggests firms aim to achieve the highest possible profits by adjusting production levels, prices, or other variables.

Decreasing Returns To Scale

A situation where increasing the inputs proportionately results in less proportionate increases in output.

Profit-maximizing Output

The level of production at which a company achieves the highest possible profit, determined by the point where marginal revenue equals marginal cost.

Production Function

A mathematical representation of the relationship between inputs (like labor and capital) and the maximum output that can be produced with those inputs.