|
6. Without a tariff, the best deal Country 1 could ever hope for is 1 computer for 1 burrito, because this is Country 2's opportunity cost. Even if Country 2 agrees to these terms of trade, with a 50% tariff in place, the actual cost of an imported computer would be 1.5 burritos, 1 burrito to pay Country 2 for the computers and .5 burritos for the tariff. (Remember, this would be Country 2's very worst possible terms of trade it could or would conceivably negotiate with Country 1)
|
| Country 1 |
Country 2 |
| Burr. | Comp. | Burr. | Comp. |
| 150 | 0 | 100 | 0 |
| 120 | 10 | 80 | 20 |
| 90 | 20 | 60 | 40 |
| 60 | 30 | 40 | 60 |
| 30 | 40 | 20 | 80 |
| 0 | 50 | 0 | 100 |
|
