Neco 2022 Economics Question 29

Practice objective / multiple choice question 29 from the 2022 Neco Economics examination.

Neco 2022 Economics Objective / Multiple Choice Hard Difficulty
Question 29 NECO • 2022 • ECONOMICS • objective

Country Y imports oil. World price is $70 per barrel. The government imposes an import quota that limits imports to 1 million barrels per year. Domestic demand for oil is \\(Q_d = 5 - 0.02P\\) (million barrels) and domestic supply is \\(Q_s = 0.01P - 0.5\\) (million barrels), where \\(P\\) is the domestic price in dollars per barrel.\n\n(i) Determine the domestic price when the quota is binding.\n(ii) Compute the consumer surplus under free trade (price = world price) and under the quota.\n(iii) Find the loss in consumer surplus caused by the quota.

Answer Options

A. Price = 160, Consumer surplus loss = 210
B. Price = 120, Consumer surplus loss = 250
Correct Answer C. Price = 150, Consumer surplus loss = 224
D. Price = 130, Consumer surplus loss = 200
Correct Answer
C
Correct Option:
Price = 150, Consumer surplus loss = 224

About This Question

This is Neco 2022 Economics Question 29. It is one of the objective questions from the 2022 Neco Economics examination.

Difficulty level: Hard .

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