Gce Model Questions Vol1 2017 Economics Question 15
Practice objective / multiple choice question 15 from the 2017 Gce Model Questions Vol1 Economics examination.
Country X imports good A and exports good B. Before any tariff, the world price of good A is £10 per unit and the world price of good B is £40 per unit, so the terms of trade (export price ÷ import price) are 4. The country imports 1 000 units of A and exports 250 units of B each year. The government then imposes a 20 % tariff on imports of good A, raising the domestic price of A by exactly 20 % while the export price of B remains unchanged. Calculate (i) the new terms of trade, (ii) the percentage change in the terms of trade, (iii) the annual tariff revenue, and (iv) briefly discuss the likely impact on national welfare.
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About This Question
This is Gce Model Questions Vol1 2017 Economics Question 15. It is one of the objective questions from the 2017 Gce Model Questions Vol1 Economics examination.
Difficulty level: Medium .
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