Protection and the Optimal Tariff

Protection and the Optimal Tariff

A simple diagrammatic device, featuring the foreign offer curve and several alternative home income-consumption loci, is presented to illustrate those cases in which the Metzler tariff paradox may arise, in this paradoxical outcome, a tariff lowers the relative domestic price of importables. it is shown that the imposition of an optimal tariff may lead to such an outcome, even though the existence of an optimal tariff is often cited as a condition sufficient to rule out various paradoxes in trade theory, including the Metzler tariff paradox.