Gce Model Questions Vol1 2024 Economics Question 43
Practice objective / multiple choice question 43 from the 2024 Gce Model Questions Vol1 Economics examination.
Country A imports good X. The price elasticity of import demand for X is \(-1.5\) and the foreign export‑supply elasticity is \(2.0\).\n(a) Using the optimal tariff formula \(t^{*}=\frac{1}{|\varepsilon_{M}|+\varepsilon_{X}}\), calculate the optimal ad valorem tariff rate (as a percentage).\n(b) The world price of X is \$20 per unit and Country A initially imports 100 units. If the government instead imposes a 5 % ad valorem tariff, compute the dead‑weight loss in dollars caused by the tariff. Assume the import‑demand elasticity remains constant.
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This is Gce Model Questions Vol1 2024 Economics Question 43. It is one of the objective questions from the 2024 Gce Model Questions Vol1 Economics examination.
Difficulty level: Hard .
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