中文（繁體）
中文（简体）
English
S6 Economics | International Trade and Comparative Advantage Paper 2 (Intermediate)
S6 Economics | International Trade and Comparative Advantage Paper 2 (Intermediate)
Using one demand curve and one supply curve, work through the six effects of a tariff: price, import volume, consumer surplus, producer surplus, government revenue and deadweight loss, then compare a quota and the terms of trade.
Attempt first, mark afterwards Allow about thirty minutes; compute surpluses as triangle areas of base times height over two, and the deadweight loss always equals consumer loss minus producer gain minus revenue.
01 Paper details (check answers afterwards)
| Item | Detail |
|---|---|
| Questions | 10 items |
| Suggested time | About 30 minutes |
| Difficulty mix | Foundation 4 · Intermediate 3 · Challenge 2 · Error redo 1 |
| Chapter | Chapter: S6 Economics | International Trade and Comparative Advantage |
| Level | S6 (Secondary 6) Economics |
02 Questions (10 items)
- FoundationA small open economy faces a world price of 10 per unit, with domestic demand Qd = 120 – 2P and supply Qs = 2P – 20. How much is imported under free trade?
- FoundationThe government imposes a tariff of 4 per unit on imports. What happens to the domestic price?
- FoundationContinuing, by how much does the import volume fall after the tariff?
- FoundationHow much tariff revenue does the government collect, and who pays it?
- IntermediateHow much consumer surplus is lost when the tariff replaces free trade?
- IntermediateHow much producer surplus is gained over the same change?
- IntermediateAdding the three effects, what is the net welfare change for the country?
- ChallengeIf the government instead uses a quota capping imports at 84 units, the domestic price matches the tariff case. Where does the 336 that was tariff revenue go?
- ChallengeThe export price index rises from 100 to 120 while the import price index stays at 100. What are the terms of trade and what do they mean?
- Error redoError review: a student writes that because a tariff protects local jobs it must raise national welfare. How should this be corrected?
03 Answers and one-line notes
| # | Answer | One-line note |
|---|---|---|
| 1 | 100 units | At P = 10, Qd is 100 and Qs is 0, so the gap of 100 – 0 = 100 units is met by imports. |
| 2 | 14 | A small country cannot change the world price, so the tariff is fully passed through: 10 + 4 = 14. |
| 3 | 84 units | At P = 14, Qd is 92 and Qs is 8, so imports are 92 – 8 = 84 units, which is 16 fewer than under free trade. |
| 4 | 336; paid by domestic consumers, a transfer from them to the government | Revenue is 4 per unit times 84 imported units = 336; it is part of consumer surplus handed to the government rather than new resources for society. |
| 5 | 384 | Free-trade surplus is 0.5 x 100 x 50 = 2500 and after the tariff 0.5 x 92 x 46 = 2116, a fall of 384. |
| 6 | 16 | At the world price domestic supply is 0 units and surplus is zero; after the tariff supply is 8 units and surplus is 0.5 x 8 x 4 = 16. |
| 7 | A net loss of 32 (384 – 16 – 336) | Consumers lose 384, producers gain 16 and the government collects 336; the remaining 32 is neither produced nor collected and is pure deadweight loss. |
| 8 | It becomes quota rent for holders of import licences, and reaches the public purse only if the quotas are auctioned | A quota restricts quantity rather than adding a tax, so the price gap comes from artificial scarcity; who captures the rent depends on how licences are allocated, which is the key difference from a tariff. |
| 9 | 120.0, an improvement of 20% | Terms of trade are the export price index divided by the import price index, 120 / 100 x 100 = 120.0, so the same exports now buy 20% more imports. |
| 10 | The gains and losses must be compared: producers and jobs gain, but consumers lose more, so net welfare falls by 32 | A tariff shifts production from more efficient imports to less efficient domestic output and cuts consumption, and the two effects together are the deadweight loss; more jobs is not the same as higher welfare. |
04 What to do after marking
- After marking, redo only the wrong items and write down which step went wrong (formula, unit, or misread number).
- Repeat the same item two days later; move to the next paper only when both attempts are correct.
- Parents only need the answer and note columns; there is no need to explain every item.
Need a tutor for this chapter? Register hereTutor Registration →
Questions and answers are written originally by the TutorZone team and are not taken from any school, publisher or examination authority paper. Every value is checked by computer.