in some consumers to purchase less of the goods.
Production effect: In small countries, if they impose a tariff, the local price of the good raises by the size of the tariff. Producers will begin to produce more because they can now sell goods domestically at a higher price. Producers obtain profits, but customers have to pay more money to buy products. In general, this kind of growth is a loss. It will increase more production costs to produce the goods in domestic market than to import from abroad.
Trade effect: If the small countries produces fewer exports and more imports, it will reduce the country’s trade.
Revenue effect: Once the small countries implement tariff policies, it will increase the price of domestic goods. As a result, customers will reduce the amount of purchasing products. At that time, the government will receive less revenue from tariff.
Net welfare effect:When a specific tariff is implemented by a small country, it will increase the domestic price by the full value of the tariff (Welfare effects of a tariff: small country, 2013). Suppose the price in the importing country increase to P2, because of the tariff. In this case the tariff rate would be tariff = P2-P1. From the diagrammatic, welfare effect of tariff plays a positive role in producer surplus and government revenue., while it has a passive role in consumer surplus and national welfare. As tariffs have no effect on the price in the rest of world, there is no welfare changes for producers or consumers. Although the countries reduce imported goods, the related reduction in exports has little impact (Corden, 1974).
4. Tariffs in large countries在大国关税
4.1 What is a Large Country?
Large countries export or import the products in a large quantity. Large countries will influence the world price when the amount of large countries’ imports or exports changes. For example, when the United States sets the tariff policy, it will succeed in assisting the government to timely and effectively address different periods of economic dilemmas. Besides, it can advance the infant industry to survive and develop. For the mature industries, it can effectively protect the local market of a set scale.
4.2 The effects of Tariffs in a Large Country
Consumption effect: Consumption effect means that consumers will purchase the products at a lower price, while customers will reduce the amount of purchasing goods. In large countries, tariffs influence the consumption effect. If the large countries carry out the tariff, the imported goods will be sold at a higher price. Foreign countries have to export less goods and sell these goods at a lower price. From the graph, Consumption effect refers to consumer surplus –(a+b+c+d).
Production effect: Once the large countries impose tariffs. Foreign producers have to reduce the amount of production to export, because the tariff make the goods at a higher price than in domestic market. However, the domestic goods are very popular at a lower price, so the domestic companies can expand the scale of produ
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