Question
EPPE3143 SECTION A (40 MARKS) INSTRUCTION: Answer ALL Questions on OMR form. I. In the following import graph, if horizontal supply line S., shifts to horizontal line S' because of the imposition of a tariff, A. the situation must be one of a "large" importing country B. the tariff must be a specific tariff C. the tariff must be an ad valorem tariff D. the tariff can be cither a specific or an ad valorem tariff 2. In the large-country case, an export tax A. leads to an increase in the price of the good in the importing country B. leads to no change in the price of the good in the importing country C. is absorbed totally by the exporting country D. increases consumer welfare in both the exporung and the importing country Questions 3-4 are based on Diagram 1 as below. Diagram 1 (not drawn to scale $II $10 0 30 34 40 48 Q The Diagram I shows the situation of a small country with free-trade in an imported product (at a price of S10) and the situation with a tariff on the product (at a price of S11).
Explanation / Answer
Question 1
Answer is option A
Question 2
Answer is option A
Question 3
Welfare Loss is (34-30)*(11-10)*0.5+(48-40)(11-10)*0.5=6
Answer is Option B
Question 4
Tariff Revenue
(40-34)*(11-10)=6
Hence Answer is Option B
Question 5
Answer is A
Question 7
Answer is C
