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The optimum tariff means:

This question was previously asked in
UGC NET Paper 2: Economics 24th Nov 2021 Shift 1
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  1. Must occur in the elastic range of the tariff imposing home country's offer curve
  2. Takes account of the probability that the partner country will retaliate with protective measures of its own
  3. Maximises total export sales of the imposing country
  4. Must occur in the elastic range of the partner country's offer curve

Answer (Detailed Solution Below)

Option 4 : Must occur in the elastic range of the partner country's offer curve
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UGC NET Paper 1: Held on 21st August 2024 Shift 1
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The correct answer is Must occur in the elastic range of the partner country's offer curve

Key Points Optimum Tariff:

  • According to the economists' optimal tariff theory, countries that are typically big, powerful importers of products can use tariffs to influence the global prices of those items.
  • The concept of optimum tariff concerns large countries that carry the bulk of the purchasing power for various goods.
  • The less elastic the foreign offer curve, the higher will be the optimum tariff.
  • Therefore, it must occur in the elastic range of the partner country's offer curve
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