It was demonstrated in Chapter 4 that free international trade, given certain restrictive assumptions, is the best regime for the world in that it increases countries’ potential welfare. It is therefore pertinent to ask why it is that nations erect impediments on their trade. To answer this question one needs to be familiar with the branch of trade theory generally referred to as theory of trade (commercial) policy.
KeywordsFree Trade Demand Curve Tariff Rate Marginal Revenue Domestic Price
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