OCR A Level Economics: Protectionism and the case for free trade (H460) – 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 – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions cover methods of protectionism, tariff and quota diagrams, effectiveness, protection versus free trade, and competitiveness policies in Component 2, Macroeconomics, of the OCR A Level Economics (H460) specification, Version 3.0 (June 2026), for first assessment in 2021. Teaching is in the study guide and the revision notes. Course pages: the OCR Economics hub, the checklist and the free diagnostics. All countries and figures are invented.

Questions

Questions 2 to 7 use one market. Country B (illustrative) imports garden benches. Domestic demand is Qd = 90 − 3P and domestic supply is Qs = 2P − 10, with quantity in thousands and price in currency units. Country B is too small to affect the world price of 12.

1. A tariff of 3 is placed on garden benches with a world price of 12. (a) Express it as an ad valorem rate. [1] (b) Distinguish a specific from an ad valorem tariff. [2]

2. (a) Calculate domestic demand, domestic supply and imports under free trade. [3] (b) A tariff of 3 is imposed. Calculate the domestic price, demand, supply, imports and tariff revenue. [4]

3. Using question 2, calculate the loss of consumer surplus, the gain in producer surplus, the tariff revenue and the net welfare loss. [5]

4. A quota of 25 thousand replaces the tariff. (a) Explain why the domestic price is again 15. [2] (b) Work out the quota rent and identify who might collect it. [2]

5. Demand rises to Qd = 105 − 3P. Calculate the domestic price and imports under the tariff of 3 and under the quota of 25. Explain which gives domestic firms more protection. [6]

6. Instead, the government pays domestic producers a subsidy of 3 per unit (demand as in question 2). (a) Calculate imports and the cost to the government. [3] (b) Compare the net welfare loss with the tariff’s. [2]

7. Each 1,000 units of bench output needs 8 workers. Using the tariff results, calculate the jobs protected, the net welfare loss per job and the consumer loss per job, then comment. [4]

8. Over a year, wages rise by 6% and productivity by 2% in Country C. In Country D wages rise by 2% and productivity by 1%. (a) Calculate the growth of unit labour costs in each country. [3] (b) Explain one policy by which Country C could improve its international competitiveness, and one limitation. [3]

9. Country B has a new solar-panel industry. Evaluate the case for protecting it. [8]

10. Country E exports mainly one raw material. Evaluate the case for free trade for Country E. [8]

11. Evaluate the effectiveness of government policies to improve a country’s international competitiveness. [8]

Answers

1. (a) 3 ÷ 12 = 25% [1]. (b) A specific tariff is a fixed sum per unit imported [1]; an ad valorem tariff is a percentage of the price, so the amount rises with the price [1]. [3] Examiner insight: Giving a number for each type, such as 3 per unit and 25%, makes a distinction clearer than words alone.

2. (a) Qd = 90 − 36 = 54 [1]; Qs = 24 − 10 = 14 [1]; imports = 40 [1]. (b) Price = 12 + 3 = 15 [1]. Qd = 45 and Qs = 20 [1]. Imports = 25 [1]. Revenue = 3 × 25 = 75 [1]. [7] Examiner insight: Show the substitution into each equation; a wrong price early on spoils every later line.

3. Consumer loss = (54 + 45) ÷ 2 × 3 = 148.5 [1]. Producer gain = (14 + 20) ÷ 2 × 3 = 51 [1]. Revenue = 75 [1]. Net loss = 148.5 − 51 − 75 = 22.5 [1], made of two triangles: 0.5 × 3 × 6 = 9 (production) and 0.5 × 3 × 9 = 13.5 (consumption) [1]. [5] Examiner insight: Treat revenue as a transfer, not a loss, and name what each triangle represents.

4. (a) At 15, Qd − Qs = 45 − 20 = 25, equal to the quota [1], so 15 clears the market and consumers face the same price as under the tariff [1]. (b) Rent = (15 − 12) × 25 = 75 [1], going to licence holders (importers or foreign exporters), or to the government if licences are auctioned [1]. [4] Examiner insight: A tariff’s rectangle is revenue; a quota’s rectangle is only revenue if the licences are sold.

5. Tariff: the price stays at 15, Qd = 60, Qs = 20, imports = 40 [1]. Quota: 105 − 3P = 2P − 10 + 25, so 5P = 90 and P = 18 [1]. Then Qd = 51, Qs = 26, imports = 25 [1]. Domestic output is 26 with the quota but 20 with the tariff [1], so the quota protects more [1]. A tariff fixes the price and lets quantity adjust, while a quota fixes quantity and lets price adjust, so consumers pay 18 rather than 15 [1]. [6] Examiner insight: Stating what each instrument holds fixed gives the comparison its reason.

6. (a) Producers receive 15, so Qs = 20, and consumers pay 12, so Qd = 54 [1]. Imports = 54 − 20 = 34 [1]. Cost = 3 × 20 = 60 [1]. (b) Net loss = 0.5 × 3 × 6 = 9, below the tariff’s 22.5 [1], because consumers still pay 12; but taxpayers fund 60 and no revenue is raised [1]. [5] Examiner insight: Say why the loss is smaller, not just that it is.

7. Jobs = 6 thousand × 8 = 48 [1]. Net loss per job = 22,500 ÷ 48 = 468.75 [1]. Consumer loss per job = 148,500 ÷ 48 = 3,093.75 [1]. Consumers lose about 3,094 for each job protected, so protection looks costly unless wider benefits exist [1]. [4] Examiner insight: Keep units in view, because the diagram is in thousands.

8. (a) C: 1.06 ÷ 1.02 = 1.0392, so 3.92% [1]. D: 1.02 ÷ 1.01 = 1.0099, so 0.99% [1]. Wages minus productivity is a close approximation: 4 points and 1 point [1]. (b) Training raises output per worker [1], lowering unit labour costs [1]. Limitation: it is costly and slow, and trained workers can move to other firms [1]. [6] Examiner insight: Naming the mechanism (productivity up, cost per unit down) works better than saying a policy “improves competitiveness”.

9. For: the infant industry argument says new firms need time to reach scale and learn [1]; a temporary tariff or subsidy may let costs fall until the industry can compete [1]; it may support jobs and a strategic technology [1]. Against: buyers of panels pay higher prices, as tariff diagrams like question 3 show [1]; protection may reduce pressure to cut costs and the industry may never grow up [1]; trading partners may retaliate against Country B’s exports [1]. Judgement: the case is stronger if protection is temporary, falls over time and the industry has a realistic route to scale [1], but weaker if a subsidy could do the job at lower cost [1]. [8] Examiner insight: A conclusion that states the conditions under which the argument holds usually reads as stronger than a bare list of pros and cons.

10. For: specialisation and trade raise output and consumption [1]; export markets allow scale [1]; imports of machinery and technology raise productivity [1]. Against: reliance on one export exposes Country E to price falls and weak terms of trade [1]; low-skill sectors may not grow, leaving structural unemployment [1]; gains may go to a few producers [1]. Judgement: free trade helps most if the country uses export income to diversify and the losers are retrained [1]; without that, gains are uneven and fragile [1]. [8] Examiner insight: Link each point to the one-product detail in the stem, not to trade in general.

11. Supply-side policies such as training, infrastructure and research raise productivity and lower unit labour costs [1]. They work in the long run and are hard to copy [1]. Their lags are long, costs are high and success is uncertain [1]. Tax cuts and deregulation raise investment [1] but lose revenue and may cause social or environmental harm [1]. Subsidies or a lower exchange rate act quickly [1], but cost money, may provoke retaliation and are easily matched [1]. Judgement: effectiveness depends on the weakness (price, quality or productivity), the time frame and whether rivals respond, so a mix is usually best [1]. [8] Examiner insight: Separating short-run and long-run effects usually makes evaluation more convincing than listing policies.

Where marks are usually lost

• Writing the tariff price but not recalculating quantities demanded and supplied.
• Counting tariff revenue as part of the welfare loss.
• Forgetting that a quota’s rectangle goes to licence holders.
• Not saying whether a tariff or a quota holds price or quantity fixed.
• Comparing methods without a reason, such as consumers facing no price rise under a subsidy.
• Ignoring units when the diagram is in thousands.
• Giving arguments for protection without conditions or a judgement.
• Describing free trade in general terms instead of using the country in the stem.
• Calling unit labour costs “wages” and leaving out productivity.

Next steps

• Revisit the revision notes and the study guide.
• Browse the OCR Economics hub and tick off topics on the checklist.
• Take one of the free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

OCR, A Level in Economics (H460) specification, Version 3.0 (June 2026), for first assessment in 2021. Area of study: the global context; topic: Trade policies and negotiations (first part).