Neco 2021 Economics Question 50

Practice objective / multiple choice question 50 from the 2021 Neco Economics examination.

Neco 2021 Economics Objective / Multiple Choice Medium Difficulty
Question 50 NECO • 2021 • ECONOMICS • objective

A country imports a manufactured good with a world price of \(P_{w}=150\) Naira per unit. Without any policy, domestic producers add a value of \(VA_{w}=30\) Naira per unit (value added at world price). When a tariff raises the domestic price to \(P_{t}=180\) Naira, the domestic value added becomes \(VA_{t}=60\). When a quota limits imports and the domestic price settles at \(P_{q}=170\) Naira, the domestic value added is \(VA_{q}=50\). Compute the effective rate of protection (ERP) for domestic producers under the tariff and under the quota, and state which policy provides the higher ERP.

Answer Options

Correct Answer A. ERP under tariff = 100%; ERP under quota = 66.7%; Tariff provides higher ERP
B. ERP under tariff = 100%; ERP under quota = 75%; Quota provides higher ERP
C. ERP under tariff = 80%; ERP under quota = 66.7%; Tariff provides higher ERP
D. ERP under tariff = 90%; ERP under quota = 60%; Tariff provides higher ERP
Correct Answer
A
Correct Option:
ERP under tariff = 100%; ERP under quota = 66.7%; Tariff provides higher ERP

About This Question

This is Neco 2021 Economics Question 50. It is one of the objective questions from the 2021 Neco Economics examination.

Difficulty level: Medium .

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