Question

a) Define the concept of “ optimum tariff rate”.

(b) what tariff rate should home country apply to maximize its elf are (GDP) in the following cases?

(i) The foreign export supply curve is perfectly elastic,

(ii) The foreign export supply curve is less than perfectly elastic. Explain your answer fully.

Answer 1

a) Define the concept of “ optimum tariff rate”.

Answer- The concept of optimum tarrif explores what should be the appropriate tarrif that maximizes a country's welfare.

As when a country imposes tariffs its volume of trade declines as imports declines on the other hand there is improvement in the term of Trade of the tariff imposing country the concept of optimum tattifs explorers to maximize the net benefit from both of them.

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