For a country that meets the assumptions of the small nation model, what is the impact of a 10% tariff on imported automobiles?

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The domestic price of automobiles will increase by exactly 10%.The domestic price of automobiles will increase by less than 10%.The domestic price of automobiles will increase by more than 10%.The domestic price of automobiles will remain unchanged due to competition within the country.

Explanation

According to the small nation model, imposing a 10% tariff on imported cars leads to a direct 10% increase in the domestic price of automobiles because the country is a price taker in the world market. Therefore, the price rises by the full amount of the tariff.