Problem
1. Why might a large country like the United States have a greater incentive than a small country to use trade restrictions?
2. Using a general equilibrium approach, point out the real income loss from a tariff to a country. What is the consumer welfare loss? Why might consumers prefer a production subsidy rather than a tariff?
3. Explain why an export subsidy is more costly in the case of a large country than in the case of a small country, other things being equal.