Question

According to UNCTAD database, France ranks as the 6th largest in the world imports with a 3.40% of the world total. Thus, it can be considered that France has a strong bargaining power in the world markets. As a result, a tariff will _________ increase its national welfare.

A) Never

B) Always

C) Sometimes

D) Only when tariff equalizes the world prices to France's domestic prices

E) None of the above is correct

Answer 1

Given that France ranks as the 6th largest in the world imports with 3.4% of the world total. Note that the tariffs are imposed on imported goods in an economy with an objective to increase their prices and protect the domestic industries from global competition. Now, the imposing tariff can prove to be a positive as well as a negative for an economy. Sometimes, the domestic industries need to learn from the global competitors about the quality of the product as well as the global taste and preferences. Also, tariffs can sometimes prove to actually support domestic industries against global competition.

Thus, As a result, a tariff will sometimes increase its national welfare.