ECON1086 International Trade - Assessment Questions

SECTION A

QUESTION A.5

A country imposing a tariff can benefit in terms of social welfare if

1. The terms-of-trade benefit exceeds the sum of production and consumption distortion loss.
2. The tariff revenue exceeds the sum of production and consumption distortion loss.
3. The consumer surplus loss is less than the producer surplus gain.
4. The terms-of-trade benefit exceeds the consumer surplus loss.

(1 mark)

Explain your answer in up to 200 words and using a diagram

(4 marks)