What is the essence of the "terms-of-trade" argument against free trade? A. A large country can improve its terms-of-trade by subsidizing exports, and the optimal export subsidy is positive. B. A large country can improve its terms-of-trade by imposing tariffs, and the optimal tariff is positive. C. Terms-of-trade is an important policy tool that is not available if the government commits to free trade. D. A small country cannot affect its terms-of-trade, so it might as well impose tariffs to raise government revenues.
What is the essence of the "terms-of-trade" argument against free trade? A. A large country can improve its terms-of-trade by subsidizing exports, and the optimal export subsidy is positive. B. A large country can improve its terms-of-trade by imposing tariffs, and the optimal tariff is positive. C. Terms-of-trade is an important policy tool that is not available if the government commits to free trade. D. A small country cannot affect its terms-of-trade, so it might as well impose tariffs to raise government revenues.
Chapter21: International Trade
Section: Chapter Questions
Problem 11QP
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What is the essence of the "terms-of-trade" argument against free trade?
A. A large country can improve its terms-of-trade by subsidizing exports, and the optimal export subsidy is positive.
B. A large country can improve its terms-of-trade by imposing tariffs, and the optimal tariff is positive.
C. Terms-of-trade is an important policy tool that is not available if the government commits to free trade.
D. A small country cannot affect its terms-of-trade, so it might as well impose tariffs to raise government revenues.
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