Managerial Economics & Business Strategy 8th Edition by Michael Baye,Jeff Prince

Exercise 9

Suppose that the U.S. Congress passes legislation that imposes a one-time lump-sum tariff on the product that a foreign firm exports to the United States.
a. What happens to the foreign firm's marginal cost curve as a result of the lump-sum tariff?
b. Will the lump-sum tariff cause the foreign firm to export more or less of the good? Explain carefully.