ENDOGENOUS PRODUCT DIFFERENTIATION AND TRADE-POLICY - IMPLICATIONS FOR THE US FOOD-INDUSTRY

The effects of tariffs on intermediate inputs and final goods in monop olistically competitive industries are assessed. Output per firm and f irm numbers decline due to input tariffs. When coupled with output tar iffs, the change in firm numbers is ambiguous. Numerical illustrations for U.S. food processing industries indicate the decline in firm numb ers is larger than the decrease in firm output for input tariffs. Mono polistic competition strengthens the response to input tariffs compare d to perfect competition. Considering the joint effects of input and o utput tariffs, the direction of change in total output may differ betw een monopolistic and perfect competition.