For a "large" country, a tariff on an imported product may be partially absorbed by the domestic consumer via a higher purchase price and partially absorbed by the foreign producer via a lower export price.

Question

Quizplus · Accepted Answer

In a large country, the size of the market may allow for some degree of absorption of a tariff by both the domestic consumer and the foreign producer. However, in a small country like the one depicted in Figure 4.4, the entire burden of a tariff on gasoline is borne by the domestic consumer.

For a "Large" Country, a Tariff on an Imported Product