Neco 2023 Economics Question 6

Practice objective / multiple choice question 6 from the 2023 Neco Economics examination.

Neco 2023 Economics Objective / Multiple Choice Hard Difficulty
Question 6 NECO • 2023 • ECONOMICS • objective

If \(Q_d = 500 - 20P\) where \(P\) is the domestic price per unit, the world price is \(P_w = \$10\). The foreign export supply elasticity at \(P_w\) is \(\varepsilon^{*}=2\) (absolute value). (a) Determine the ad valorem tariff rate that maximizes national welfare. (b) Compute the specific tariff amount, the new import quantity and the tariff revenue after the tariff is imposed.

Answer Options

A. Ad valorem tariff = 0.6 (60%). Specific tariff = $6 per unit. Import quantity = 150 units. Tariff revenue = $900.
B. Ad valorem tariff = 0.5 (50%). Specific tariff = $5 per unit. Import quantity = 180 units. Tariff revenue = $900.
C. Ad valorem tariff = 0.4 (40%). Specific tariff = $4 per unit. Import quantity = 250 units. Tariff revenue = $1000.
Correct Answer D. Ad valorem tariff = 0.5 (50%). Specific tariff = $5 per unit. Import quantity = 200 units. Tariff revenue = $1000.
Correct Answer
D
Correct Option:
Ad valorem tariff = 0.5 (50%). Specific tariff = $5 per unit. Import quantity = 200 units. Tariff revenue = $1000.

About This Question

This is Neco 2023 Economics Question 6. It is one of the objective questions from the 2023 Neco Economics examination.

Difficulty level: Hard .

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