Optimal Tariffs

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Sometimes a tariff can help a large country by shifting terms of trade in its favor. In the real world, it's not quite this simple. As we've seen, the less-large

Sometimes a tariff can help a large country by shifting terms of trade in its favor. In the real world, it's not quite this simple. As we've seen, the less-large country or countries may retaliate. Indeed, one rationale for free trade agreements in that they help avoid mutually destructive outcomes when many countries try to shift the terms of trade in their favor, and they all end up worse off.

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