Effect of tariff on national welfare

Question 1

What is the overall change of national welfare of a small country when we impose tariff?

Answer 1

Overall change in NW = -(b+d)
=> Deadweight loss by tariff imposition

Question 2

What are the two conclusions for the imposition of tariff on the national welfare of a small country?

Answer 2

i) Tariff imposition of a small country always leads to deterioration of national welfare: free trade is better than trade protectionism
ii) Import quantity decreases as a result of tariff imposition

Question 3

What is the overall change of national welfare of a large country when we impose tariff?

Answer 3

Overall change in NW = e - (b+d)

Question 4

What is the conclusion for the imposition of tariff on the national welfare of a large country?

Answer 4

Tariff imposition of a large country may lead to the improvement or deterioration of national welfare