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Arguments for and Against Trade Control/Protection · Paper 1 — Free Economics HL Practice Questions
1FoundationSAQ-SImpact on consumers, producers and governments8 marksPaper 1~12 min
Country X imposes a tariff on imported shoes. Before the tariff, consumers paid USD 50 per pair for imported shoes. After the tariff, the domestic price rises to USD 70 per pair. The government collects tariff revenue of USD 20 per pair on the 100 000 pairs still imported. Domestic producers increase output as a result of the tariff.
(a)
Define the term 'tariff'. [2 marks]
(b)
Explain one impact of this tariff on domestic consumers of shoes in Country X. [2 marks]
(c)
Using the data provided, calculate the total tariff revenue collected by the government of Country X and evaluate whether this revenue is sufficient to conclude that the tariff is beneficial for Country X as a whole. [4 marks]
Solutions
2MasterySAQ-SImpact on consumers, producers and governments6 marksPaper 1~9 min
The government of Country X imposes a tariff on imported rice. Before the tariff, the domestic price equals the world price of USD 30 per kg. After the tariff, the domestic price rises to USD 34.50 per kg. Domestic consumption falls from million kg to million kg, and domestic production rises from million kg to million kg.
(a)
Calculate the change in consumer surplus resulting from the tariff. [2 marks]
(b)
Calculate the increase in producer surplus resulting from the tariff. [1 mark]
(c)
Calculate the tariff revenue earned by the government and hence determine the deadweight loss imposed on Country X. [3 marks]
Solutions
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