单选题

Assuming its trading partner does not retaliate, which of the following conditions must hold in order for a large country to increase its national welfare by imposing a tariff?

A、 It must have a comparative advantage in the production of the imported good.
B、 The deadweight loss must be smaller than the benefit of its improving terms of trade.
C、 It must auction the import licenses for a fee to offset the decline in the consumer surplus.

【正确答案】 B

【答案解析】

B is correct. The large country is able to cause the foreign exporter to reduce price in order to retain market share. In the large country, domestic producers gain from higher volume and the government gains from collecting the tariff. The sum of these two gains must exceed the deadweight loss to domestic consumers to achieve a national welfare gain. The change in terms of trade causes income redistribution from the foreign exporter to the domestic producer.