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3 marksInternational Trade

CAPE Economics Unit 2 · 2006 · Paper 2 · Question 5(a)(ii)

Domestic demand and supply schedules for shirts are provided in a table.

Identify the equilibrium price (PE) and equilibrium quantity (QE).

This question uses a figure or table from the paper — you'll see it when you practise.

The mark scheme is shown once you've answered.

Practise this question

Other parts of this question

  1. 5(a)(i)Using graph paper, plot the domestic demand and supply curves for shirts.[6 marks]
  2. 5(a)(iii)Show the world price of $3 as P_w on the diagram you have drawn.[4 marks]
  3. 5(a)(iv)On your diagram, indicate the levels of domestic consumption and domestic production at the world price.[4 marks]
  4. 5(b)(i)Show the tariff price as P_t on the diagram you have drawn.[3 marks]
  5. 5(b)(ii)Following the imposition of the tariff, by how much will domestic production increase?[2 marks]
  6. 5(b)(iii)What is the new level of domestic consumption following the tariff?[2 marks]
  7. 5(b)(iv)Following the imposition of the tariff, how many shirts will be imported?[3 marks]
  8. 5(b)(v)In terms of tax revenues, how much will the tariff yield?[3 marks]
  9. 5(c)(i)On your diagram, shade in the area representing the net welfare loss (deadweight loss) caused by the tariff.[5 marks]
  10. 5(c)(ii)Calculate the total loss in welfare (deadweight loss).[5 marks]
  11. 5(d)(i)Explain who gains and who loses when a country allows trade and becomes an exporter.[4 marks]
  12. 5(d)(ii)Explain who gains and who loses when a country allows trade and becomes an importer.[4 marks]
  13. 5(d)(iii)Considering the circumstances in (d)(i) and (d)(ii), do the gains from trade exceed the losses?[2 marks]

More practice: the rest of this paper · more International Trade questions · all CAPE Economics Unit 2 past papers