Question

If a tariff is imposed by a country that is large enough to have market power in global markets, the domestic consumer will face a domestic price ________ than the world price for the product, and this world price will be ________ by the tariff.

Answer 1

If a tariff is imposed by a country that is large enough to have market power in global markets, the domestic consumer will face a domestic price increase than the world price for the product, and this world price will be affected by the tariff.

Explanation:

A tariff is nothing but a tax imposed by one country on the goods and services imported on the other.It is highly productive and impressive to the importing countries as they are the ones who sets the policy and are receiving the primary benefits.It's primary role is that it generates revenue on the goods and services brought into the country.It also turns out to be ignition point for negotiations between two countries.

Tariff increases the price of the imported goods and because of this the domestic producers are not forced to reduce their prices in the global competition but the domestic consumers are forced to pay higher prices as a result.An overall result is that it leads reduction in the import and raises the domestic production thereby increasing the consumers prices.Therby this affects the global price of that commodity.