You're viewing 1 free preview question for Economics HL — subscribe to unlock 15 more, plus the Full Question Bank, Mock Papers & Worksheets.Upgrade

Arguments for and Against Trade Control/Protection · Paper 3 — Free Economics HL Practice Questions

1ChallengeSAQ-LImpact on consumers, producers and governments7 marksPaper 3~11 min
The government of Andovia is considering the imposition of a specific tariff on imported rice, a staple food. The domestic market for rice is currently in free trade equilibrium. The world price of rice is USD 200 per tonne. Domestic demand supply schedules (in thousands of tonnes per year) are: Qd=500−0.5PQs=−100+PQ_d = 500 - 0.5P \qquad Q_s = -100 + P where PP is the price in USD per tonne. The demand intercept (choke price) is USD 1000 per tonne.
(a)
Calculate the loss in consumer surplus resulting from the imposition of a specific tariff of USD 50 per tonne on imported rice. [3 marks]
(b)
Using your answer to (a), explain why the tariff is likely to have a disproportionately harmful effect on lower-income households in Andovia. [2 marks]
(c)
Calculate the combined gain to domestic producers and the government from the tariff, and evaluate whether the tariff improves overall economic welfare in Andovia. Formulae provided: - Consumer surplus: area below demand curve and above price paid - Producer surplus: area above supply curve and below price received - Tariff revenue == tariff per unit ×\times quantity of imports - Deadweight loss: net loss of total surplus due to the tariff [2 marks]
diagram

Solutions

Questions 2-16

Unlock these questions with Premium

Sign Up →

That's every free question here — 1 of 16.

+15 more questions, plus Mock Papers & Worksheets, are waiting in Premium.

Upgrade