If the home nation allows free trade but imposes a tariff on a product currently produced by a home firm monopoly, what is the outcome?
a. The home firm then will regain its monopoly control over the price.
b. The home firm will be able to charge a higher price (world price + tariff), but it will become a price taker, just like a competitive firm.
c. The home nation's firm will be able to limit quantity and charge a higher price.
d. The monopoly firm will lower price, increase sales, and undercut the foreign competition.
Ans: b. The home firm will be able to charge a higher price (world price + tariff), but it will become a price taker, just like a competitive firm.
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