When a country that meets the criteria of the large nation model levies an import tariff, what happens to the domestic price of the imported good?

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The domestic price rises by an amount greater than the tariff imposed.The domestic price increases exactly by the tariff amount.The domestic price goes up by less than the tariff value.None of the statements above are correct.

Explanation

In the large nation model, imposing an import tariff causes the domestic price to increase, but by less than the tariff itself. This occurs because the country’s market power allows it to influence world prices, leading to a partial pass-through of the tariff to domestic consumers.