Th4.1: ^^^ Tariffs

Question 1

What are tariffs?

Answer 1

taxes placed on imported goods which make them more expensive to buy, making people more likely to buy domestic goods

Question 2

Refer to PP

Look at Graph 17. Why is price set at P1 and what does this result in?

Answer 2

price is set at P1 because of the interaction of demand and supply in the world market. this means domestic producers will produce Q1 whilst consumers demand Q2

Question 3

Refer to PP

Look at Graph 17. What will be spent buying imports?

Answer 3

Q1ABQ2

Question 4

Refer to PP

Look at Graph 17. What goods will the country import?

Answer 4

import Q2-Q1 goods

Question 5

Refer to PP

Look at Graph 17. The government could introduce a tariff so prices rise to P2. What would this do?

Answer 5

mean that firms produce Q3 and consumers want Q4, so this time only Q3ABQ4 will be spent on imports

Question 6

Refer to PP

Look at Graph 17. If prices rise to P2, the government will raise revenue of…

Answer 6

KLMN (the shaded area)

Question 7

Refer to PP

Look at Graph 17. However, an increase in price does what to the consumer surplus?

Answer 7

causes it to fall from BP1C to LP2C

Question 8

Refer to PP

Look at Graph 17. After an increase in price, what goes to the producers?

Answer 8

KAP1P2

Question 9

Refer to PP

Look at Graph 17. After an increase in price, what areas are deadweight loss?

Answer 9

X and Y

Question 10

Although tariffs help home producers, raise revenue and reduce the money leaving in imports, they are…

Answer 10

they are inefficient as they causes deadweight loss