Economics • Economic BasicsHard
In the theory of international trade, what does the 'Lerner Symmetry Theorem' establish?
A. A tax on imports has the exact same protective and allocative effect as an export subsidy
B. An import tariff is equivalent in its incidence and trade-restricting effect to an export tax✓ Correct Answer
C. Devaluation of currency always improves the trade balance in the short run
D. Free trade leads to complete equalization of factor prices across countries regardless of endowments
💡 Solution & Explanation
The Lerner Symmetry Theorem establishes that an import tariff produces identical relative price and trade volume effects as an equivalent tax on exports. This principle highlights the symmetry of trade interventions in standard competitive models.
More Economics Economic Basics questions
- In the context of production theory, what does an expansion path illustrate?
- In macroeconomic theory, 'Tobin's Q' ratio measures the relationship between:
- What does the term 'Fiscal Drag' refer to in economic policy?
- In welfare economics, the condition known as 'Kaldor-Hicks Efficiency' permits which of the following…
- In microeconomics, the 'Market for Lemons' paper by George Akerlof illustrates which of the following…