Question

Which statement is false? A A large country never gains from imposing an export subsidy. B A small country never gains from imposing an export subsidy. C A large country never gains from imposing an import tariff. D A small country never gains from imposing an import tariff.

Answer 1

Answer:

A large country never gains from imposing an import tariff - option C.

Explanation:

For an import tariff, the national welfare effect  is assessed as the sum of the producer and consumer surplus and government revenue effects.

There may be a rise or fall in national welfare, when a large country implements an import tariff.

A large country never gains from imposing an import tariff.  The reason is that:

Whenever a large country implements a large tariff, it will result into a fall in  national welfare but whenever a large country implements a small tariff, it will raise national welfare.

When the  national welfare decreases,  the implication is that the sum of the gains is lower than the sum of the losses across all individuals in the economy.

Thus, a large country never gains from imposing an import tariff - option C.