Restrictions on free trade

Figure 8 shows the domestic demand (D_d) and supply (S_d) curves for paper in a country.

Figure 8 also shows the world supply curve when the country does not have any restrictions on imports of paper (S_w) and the world supply curve when a tariff of $10 per unit is imposed on paper imported from the rest of the world (S_wt).

Following the introduction of the tariff, what is the change in the amount the country has to pay to the rest of the world for the paper it imports?

Extract E (lines 7–9) states: ‘It was hoped that policy measures, including a reduction in tariffs... would help to reduce inflation’.

With the help of a diagram, explain how a reduction in tariffs could help to reduce inflation.

Explain how the data in Extract D (Figure 3) and (Figure 4) show why the US may have decided to implement protectionist policies.

Extract E (lines 10–11) states: ‘US tariffs on $200bn of Chinese imports came into effect in September.’

With the help of a diagram, explain how the imposition of a tariff may affect the volume of imports.

Extract F (lines 17–19) states: ‘Some argue that many developed countries that now champion free trade, only achieved economic prosperity through protectionist policies.’

Using the data in the extracts and your knowledge of economics, assess the view that developing economies, such as Brazil and China, should pursue protectionist policies to achieve greater economic development.

The diagram below shows the market demand curve (D), the market supply curve (S) for solar panels produced in a country, and the world market supply curve (S_W) for solar

To protect domestic producers of solar panels the country introduces a tariff on imports. The imposition of the tariff increases the price of solar panels from the world market price

Following the imposition of the tariff, the amount of tariff revenue collected by the government is shown by the area

Extract B (lines 17–19) states ‘India still protects its economy with anti-dumping measures and export subsidies that are designed to promote economic growth.’

With the help of a diagram, explain how export subsidies may help promote economic growth in India.

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