IB DP Economics: Arguments for and against protection – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – the IB holds copyright in its own papers. Use these alongside the official past papers available through your school or the IB store.

This practice set follows the IB Diploma Programme Economics guide (first assessment 2022, published February 2020), the course examined from the 2022 session onwards. It covers sub-topic 4.3, Arguments for and against trade control/protection, which is SL and HL. The guide marks no 4.3 content as HL only, so no question is labelled HL. All countries, firms and figures are fictional and illustrative.

Revise first with the study guide or the revision notes. See also the IB DP Economics hub and the printable checklist. Questions marked calculator-free suit the style of Paper 1.

Questions

1. Define dumping. [2]

2. Outline the infant industry argument for trade protection. [3]

3. (calculator-free) A fictional firm, Orlin Cycles, makes bicycles in Tarvia. Imported bicycles sell for 60. Its average cost is 90 at 5 000 bicycles a year, 75 at 20 000 and 45 at 50 000.

(a) Calculate the loss per bicycle and the total loss at 5 000 bicycles, if it sells at the import price. [2] (b) Calculate the smallest tariff, as a percentage of the import price, that would let the firm break even at 5 000 and at 20 000 bicycles. [2] (c) Explain why the tariff should be temporary. [2]

4. (calculator allowed) The fictional country Pellia imports fabric at a world price of 50 a unit. After a tariff of t per cent, import volume is M = 600 − 8t.

(a) Calculate tariff revenue when t = 20. [2] (b) Calculate revenue when t = 40 and when t = 50. [2] (c) State which of the rates 20, 40 and 50 gives the highest revenue. [1] (d) Explain why revenue falls at the highest rate, and why this matters for a government that relies on tariffs. [2]

5. (calculator allowed) Pellia exports goods worth 1 200 and imports goods worth 1 500.

(a) State the balance on goods. [1] (b) Imports fall by 10% after a tariff. Calculate the new balance. [2] (c) Pellia’s trading partners retaliate and exports fall by 6%. Calculate the balance after retaliation. [2] (d) Explain one reason why protection may not remove a deficit permanently. [2]

6. (calculator allowed) Pellia raises the price of imported cloth from 40 to 46 with a tariff, and buyers purchase 2.5 million metres a year at the new price. The policy saves 120 jobs, each paid 21 000 a year.

(a) Calculate the tariff as a percentage of the original price. [1] (b) Calculate the extra cost to buyers. [1] (c) Calculate the cost per job saved. [1] (d) Comment on whether the policy is justified on jobs grounds. [3]

7. Explain two different arguments a government might use to restrict imports of a food product. [4]

8. (calculator-free) Two fictional countries, Kelmar and Ostia, each choose free trade or protection. The table shows national benefit as (Kelmar, Ostia).

	Ostia free trade	Ostia protects
Kelmar free trade	(7, 7)	(4, 9)
Kelmar protects	(9, 4)	(5, 5)

(a) Each country picks the option that gives it more whatever the other does. Identify the outcome. [2] (b) Compare it with the free trade outcome and explain what the table shows about retaliation. [3] (c) State one reason why the real world may differ from the table. [1]

9. Explain how a tariff on imported steel could reduce the export competitiveness of a country’s car makers. [4]

10. Mirova is a fictional economically least developed country that earns most of its export revenue from one crop. Explain how the diversification argument could justify protection for a new manufacturing industry. [4]

11. Discuss whether protecting jobs is a good reason for a country to restrict imports of footwear. [10]

12. Evaluate the view that free trade is better than protection for an economically least developed country. [12]

Answers

1. Dumping is selling in a foreign market at a price below the cost of production [1], or below the price charged in the producer’s home market [1]. [2] Examiner insight: A definition needs the comparison point; “selling cheaply abroad” without cost or home price leaves the idea incomplete.

2. A new industry has high costs because output is small and workers are inexperienced [1]. Established foreign rivals are more efficient, so it cannot compete [1]. Temporary protection lets it grow until it can compete unaided [1]. [3] Examiner insight: “Outline” asks for a brief account, so three short linked statements fit better than a long paragraph.

3. (a) Loss per bicycle = 90 − 60 = 30 [1]. Total loss = 30 × 5 000 = 150 000 [1]. [2] (b) At 5 000: 30 ÷ 60 = 50% [1]. At 20 000: (75 − 60) ÷ 60 = 15 ÷ 60 = 25% [1]. [2] (c) At 50 000 bicycles the cost (45) is below the import price (60), so protection is no longer needed [1]. A permanent tariff would raise prices and weaken the incentive to cut costs [1]. [2] Examiner insight: In a calculator-free question, show each division so your method can be followed even if the arithmetic slips.

4. (a) M = 600 − 8 × 20 = 440 [1]. Revenue = 50 × 0.20 × 440 = 4 400 [1]. [2] (b) At 40: M = 280, revenue = 50 × 0.40 × 280 = 5 600 [1]. At 50: M = 200, revenue = 50 × 0.50 × 200 = 5 000 [1]. [2] (c) 40% [1]. [1] (d) At the highest rate imports fall further, so the tax base shrinks faster than the rate rises [1]. A government that depends on tariffs cannot raise revenue endlessly by raising the rate [1]. [2] Examiner insight: The common slip is to use the pre-tariff quantity; find the new quantity first.

5. (a) 1 200 − 1 500 = a deficit of 300 [1]. [1] (b) New imports = 1 500 × 0.90 = 1 350 [1]. Balance = 1 200 − 1 350 = a deficit of 150 [1]. [2] (c) New exports = 1 200 × 0.94 = 1 128 [1]. Balance = 1 128 − 1 350 = a deficit of 222 [1]. [2] (d) Partners can retaliate, which cuts exports [1], so the gain is partly lost, as part (c) shows. Or the cause of the deficit may be low competitiveness or an overvalued currency, which a tariff does not change [1]. [2] Examiner insight: “Explain one reason” is better answered by developing one reason fully than by naming two briefly.

6. (a) 6 ÷ 40 = 15% [1]. [1] (b) 6 × 2 500 000 = 15 000 000 [1]. [1] (c) 15 000 000 ÷ 120 = 125 000 [1]. [1] (d) The cost per job saved (125 000) is far above the 21 000 wage, by 104 000 [1]. On jobs grounds alone this is poor value, since the money could fund retraining instead [1]. A fuller judgement also counts jobs lost in cloth-using industries and through retaliation [1]. [3] Examiner insight: “Comment” asks for a reasoned view tied to your numbers; quote the figure from (c).

7. Health and safety: imports may carry contamination that consumers cannot spot when they buy [1]; inspecting or restricting them reduces the risk [1]. National security: food is a basic need, and a foreign supplier may cut supply in a crisis [1]; protecting home farmers keeps supply available [1]. Other arguments are acceptable if explained. [4] Examiner insight: Two arguments need two different mechanisms; one mechanism under two labels is still one argument.

8. (a) Whatever Ostia does, Kelmar gains more by protecting (9 against 7, and 5 against 4) [1]; the same is true for Ostia. The outcome is both protect, (5, 5) [1]. [2] (b) Free trade gives (7, 7), so each country is better off than at (5, 5) [1]. Each protects to gain at the other’s expense, but the other’s response leaves both worse off [1], which shows how retaliation can cancel the gain from protection [1]. [3] (c) Countries can negotiate and agree to avoid barriers, or the payoffs may be unknown [1]. [1] Examiner insight: Use the actual numbers from the table; a bare claim that retaliation is bad leaves the comparison unfinished.

9. Steel is an input for car makers [1]. A tariff raises the price of imported steel [1] and raises the cost of making cars [1]. Higher costs make exported cars dearer, so fewer are sold abroad [1]. [4] Examiner insight: Write each link in the chain; do not jump from “tariff” to “fewer exports”.

10. Dependence on one crop means a fall in its world price cuts export earnings and incomes [1]. Protection for a new manufacturing industry can shelter it from imports while it develops [1]. If it succeeds, the country has a second source of output and exports [1], so a price fall in the crop hurts less [1]. [4] Examiner insight: Anchor your answer to the stated context: dependence on one crop is the risk to build on.

11. Model plan; real papers are marked against markbands, not point by point. Indicative points: For: imports can displace footwear workers, and a tariff raises the import price so domestic firms keep sales [1]. Jobs support workers’ incomes and local communities [1]. Unemployment also costs the government benefit payments and lost tax [1]. An example, such as a fictional town where most jobs depend on one footwear factory, adds weight when explained [1]. Against: consumers pay higher prices for footwear [1]. Cost per job saved may exceed the wage [1]. Jobs may be lost in shops, importers and exporters, and through retaliation [1]. Resources stay in a less efficient industry [1]. Evaluation: it depends on the cost per job, whether protection is temporary, whether retraining could do the same at lower cost, and whether retaliation is likely [1]. A conclusion that follows, such as “justified only if temporary and the cost per job is close to the wage” [1]. [10] Examiner insight: “Discuss” asks for a balanced review and a conclusion; a final paragraph that only repeats earlier points does not weigh anything.

12. Model plan; real papers are marked against markbands, not point by point. Indicative points: For protection: infant industries may need shelter to reach scale [1]. Diversification away from a few primary exports reduces risk [1]. Tariffs may be an easy revenue source where income tax is hard to collect [1]. Dumping from larger economies may destroy new firms [1]. For free trade: access to larger markets allows scale economies [1]. Cheaper imported machinery lowers costs [1]. Competition forces firms to improve efficiency [1]. Retaliation would be costly for a country that depends on exports [1]. Evaluation: the answer depends on whether protection is temporary and targeted [1], on the strength of institutions that must run it [1], and on alternatives such as subsidies [1]. A supported judgement, for example “mostly free trade, with limited protection for specific new industries” [1] is needed. [12] Examiner insight: A one-sided essay shows knowledge but not weighing; leave time for conditions and a justified judgement.

Where marks are usually lost

• Defining dumping as “low prices” with no comparison point.
• Using the pre-tariff quantity, or forgetting to turn a percentage tariff into a per-unit amount, in revenue answers.
• Ignoring retaliation in balance of payments answers.
• Listing arguments instead of weighing them against each other.
• A conclusion that restates the arguments and takes no position.

Next steps

• Re-read the revision notes and study guide.
• Return to the IB DP Economics hub and tick off the printable checklist.
• Take the free 10-minute diagnostics to find your next weak area.
• Book a free trial class if you would like feedback on a written answer.

Official syllabus

IB Diploma Programme Economics guide, first assessment 2022, published by the International Baccalaureate Organization in February 2020. This page covers sub-topic 4.3 of Unit 4, The global economy.