IB DP Economics: Types of trade 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 4.2, Types of trade protection. Tariffs, quotas, subsidies and administrative barriers are SL and HL. Questions marked HL only use the stakeholder calculations that the guide lists for HL. Every country, market and figure is fictional, and quantities are in thousands.

Read the study guide first, or revise from the revision notes. The course page is the IB DP Economics hub, and the printable checklist tracks each outcome. Try the free 10-minute diagnostics to find weak areas. Diagrams are described in words here, so draw your own on paper as you work.

Questions

1. Define a tariff. [2]

2. Sketch and label a diagram to show the effect of a tariff in a market where the country imports the good. [4]

3. Norland imports tyres. The world price is 40 currency units. The domestic demand and supply data are:

Price	Quantity demanded	Quantity supplied
40	100	40
50	80	60

Norland now imposes a tariff of 10 per tyre.

(a) State domestic production before and after the tariff. [2] (b) State the quantity of imports after the tariff. [1] (c) Explain why consumption of tyres falls. [2]

4. (HL only, calculator allowed) Zandria imports bicycles at a world price of 40. Demand is Qd = 200 − 2P and supply is Qs = 3P − 50. The government imposes a tariff of 6 per bicycle.

(a) Calculate the quantity of imports before and after the tariff. [2] (b) Calculate government revenue. [1] (c) Calculate the loss of consumer surplus. [2] (d) Calculate the gain in producer surplus. [1] (e) Calculate the total welfare loss. [2]

5. Explain two ways in which an import quota differs from a tariff that produces the same domestic price. [4]

6. (HL only, calculator allowed) Kelvar imports cotton at a world price of 24. Demand is Qd = 150 − 3P and supply is Qs = 2P − 20. The government sets an import quota of 20.

(a) Calculate the domestic price with the quota. [2] (b) Calculate the quota rent. [2] (c) Calculate the welfare loss to Kelvar, assuming the rent is kept inside the country. [2]

7. (calculator-free) Explain, using a diagram, the effect of a per-unit subsidy to domestic producers in a country that imports a good at the world price. [5]

8. (HL only, calculator allowed) Meridia exports tea at a world price of 44. Demand is Qd = 160 − 3P and supply is Qs = 2P − 30. The government pays an export subsidy of 6 per unit.

(a) Calculate exports before and after the subsidy. [2] (b) Calculate what the subsidy costs the government. [1] (c) Calculate the loss of consumer surplus. [2] (d) Calculate the gain in producer surplus. [1] (e) Calculate the net change in welfare. [1]

9. Explain two ways in which a product standard applied only to imports can reduce the quantity of imports. [4]

10. Discuss whether a government that wants to expand a domestic steel industry should use a tariff or a production subsidy. [10]

11. The fictional country of Halvern requires all imported toys to be tested at one domestic laboratory. Each tested toy costs importers a fee, and testing takes several weeks. Domestic toy makers test their own products. To what extent is this rule a genuine safety measure and not protection? [8]

Answers

1. A tariff is a tax on imported goods [1]. It raises the price of the import in the domestic market [1]. [2] Examiner insight: Aim to name the tool by its mechanism, a tax levied on imports; “a barrier to trade” is too wide to define it.

2. Axes are price and quantity, with domestic demand D and domestic supply S labelled [1]. A horizontal world price line Pw sits below the point where D meets S, and a second line Pw + t above it [1]. Four quantities are marked on the horizontal axis: Qs and Qd under free trade, and Qs and Qd with the tariff [1]. The revenue rectangle is shaded between the two new quantities and the price gap, with the two welfare-loss triangles labelled [1]. [4] Examiner insight: A diagram that omits the world price line or the quantities cannot show the effect on imports, however neat it looks.

3. (a) Before: 40 [1]. After: 60 [1]. (b) At 50, imports = 80 − 60 = 20 [1]. (c) The tariff raises the domestic price from 40 to 50 [1]. A higher price moves consumers up the demand curve, so quantity demanded falls from 100 to 80 [1]. Examiner insight: “State” asks for a bare value, so spend no time on reasons in part (a); the reasoning belongs in part (c), where the command term is “explain”.

4. (a) Before: Qd = 200 − 80 = 120 and Qs = 120 − 50 = 70, so imports are 50 [1]. After, at 46: Qd = 108 and Qs = 88, so imports are 20 [1]. (b) 6 × 20 = 120 [1]. (c) ½ × (120 + 108) × 6 [1] = 684 [1]. (d) ½ × (70 + 88) × 6 = 474 [1]. (e) ½ × 6 × (88 − 70) = 54 and ½ × 6 × (120 − 108) = 36 [1]. Total = 54 + 36 = 90 [1]. Check: 474 + 120 + 90 = 684. Examiner insight: Part (e) can be found as consumer loss minus producer gain minus revenue, but showing the two triangles protects the method mark if one earlier figure is wrong.

5. First, revenue: a tariff pays area d to the government [1], whereas a quota creates quota rent, collected by licence holders and not necessarily by the government [1]. Second, adjustment: a tariff fixes the price gap and lets the quantity of imports respond to demand [1], while a quota sets the quantity and lets the price respond, so a rise in demand pushes the price further up [1]. [4] Examiner insight: Pair each difference with its consequence for price or quantity; two bare labels give you little to build on.

6. (a) Set Qd − Qs = 20: 150 − 3P − (2P − 20) = 20 [1]. So 170 − 5P = 20 and P = 30 [1]. (b) At Pw = 24 the price gap is 30 − 24 = 6 [1]. Rent = 6 × 20 = 120 [1]. (c) At 24: Qd = 78 and Qs = 28. At 30: Qd = 60 and Qs = 40. Triangles: ½ × 6 × (40 − 28) = 36 and ½ × 6 × (78 − 60) = 54 [1]. Total = 90 [1]. Examiner insight: The phrase “kept inside the country” tells you not to count the rent as a loss; read such conditions before you start the calculation.

7. The subsidy lowers producers’ costs, so S shifts down by the subsidy, equal to a shift to the right [1]. Consumers can still buy at the world price, so the price they pay is unchanged [1]. Producers receive Pw plus the subsidy, so domestic output rises along the old supply curve [1]. Quantity demanded is unchanged, so imports fall by the rise in domestic output [1]. The government pays the subsidy times the new output, which is the cost to taxpayers [1]. [5] Examiner insight: Saying the consumer price is unchanged separates a good answer from one that treats a subsidy like a tariff.

8. (a) Before, at 44: Qd = 28 and Qs = 58, so exports are 30 [1]. After, at 50: Qd = 10 and Qs = 70, so exports are 60 [1]. (b) 6 × 60 = 360 [1]. (c) ½ × (28 + 10) × 6 [1] = 114 [1]. (d) ½ × (58 + 70) × 6 = 384 [1]. (e) 384 − 114 − 360 = −90 [1]. Examiner insight: The domestic price rises to Pw plus the subsidy; using Pw alone for the consumer loss is the usual error and loses the accuracy marks.

9. First, extra cost: a testing or labelling requirement adds a cost per unit [1], which raises the price of imports and so reduces the quantity bought [1]. Second, delay and uncertainty: slow inspections or the risk that goods are rejected make importers bring in less [1], so supply of imports falls [1]. [4] Examiner insight: “It is a barrier” is not an explanation; credit comes from a mechanism that leads to fewer imports.

10. Model plan with indicative content. The guide says papers use an analytic markscheme together with markbands, so treat this as indicative content and not a tally.

• Both tools raise domestic output: the tariff by raising the price producers get, the subsidy by paying them more per unit [1].
• Tariff: consumers pay a higher price and buy less, a cost for buyers, including firms that use steel [1].
• Subsidy: the consumer price is unchanged, so buyers are not harmed [1].
• Tariff: raises revenue, which can fund other spending [1].
• Subsidy: costs taxpayers money, and the burden depends on how large the budget deficit is [1].
• Both cause welfare loss from output that costs more than imports, shown by the production triangle [1].
• Diagrams for each tool used to support the points [1].
• Tariff may provoke other countries to respond with their own tariffs, harming exporters [1].
• Subsidy may be hard to end once firms depend on it [1].
• A judgment, such as the subsidy being less harmful to consumers but dearer to the budget, with a criterion given [1]. [10] Examiner insight: Explaining only the tariff leaves the question half answered; the task is to weigh the two tools against each other.

11. A model plan.

• The laboratory fee adds a cost per unit that only imports pay, so import prices rise [1].
• Weeks of delay reduce how much can be sold and when [1].
• The fee is a compliance cost and not government revenue, so resources are used up [1].
• Domestic toy makers avoid the fee and delay, so they gain a price and timing advantage [1].
• Consumers face higher prices and less choice [1].
• Testing could have a real purpose: unsafe toys harm children, and testing before sale may help prevent that [1].
• Evidence of protection: the safety test applies only to imports, since local makers test themselves [1].
• Judgment: the rule may have a safety motive, but different treatment suggests it also shelters domestic firms; a rule that tested every toy to the same standard would be more convincing [1]. [8] Examiner insight: With “to what extent”, commit to a view and back it with details from the case, rather than listing effects.

Where marks are usually lost

• Drawing the diagram without the world price line or without the new quantities.
• Using free-trade imports to calculate tariff revenue.
• Taking trapezoid widths from the wrong curve. Use the old and new quantities on the same curve.
• Treating a quota as if the government always collects the rent.
• Saying a producer subsidy raises the consumer price in an import-competing market.
• Using Pw instead of Pw plus the subsidy when finding the effect of an export subsidy on the home market.
• Writing “calculate” answers as a single number with no working.
• Describing the standard as bad without considering its safety purpose, or good without noticing who it treats differently.

Next steps

• Revise the key methods in the revision notes.
• Reread the diagrams in the study guide.
• Return to the IB DP Economics hub and the printable checklist.
• Take all free 10-minute diagnostics to find the next topic.
• Book a free trial class if you want to talk a diagram through.

Official syllabus

Source: IB Diploma Programme Economics guide, first assessment 2022, published by the International Baccalaureate Organization in February 2020. Sub-topic 4.2, Types of trade protection (includes HL only calculations).