Who Bears the Burden of the Terms-Of-Trade Effect When a Large

question 28

Multiple Choice

Who bears the burden of the terms-of-trade effect when a large country imposes a tariff?

• A) foreign consumers
• B) foreign producers
• C) domestic producers
• D) domestic consumers

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Definitions:

Marginal Benefit

The increased enjoyment or advantage obtained from consuming one more unit of a good or service.

Proposed Tax

A tax suggested by a government or authority but not yet implemented, often subject to legislative approval or public referendum.

Resources Allocation

The process of distributing available resources among various uses or projects in an effective manner.

Median-Voter Model

The theory that under majority rule the median (middle) voter will be in the dominant position to determine the outcome of an election.