Economics (AS & A Level) · Oct / Nov 2021 · Paper 12 · Question 27

The diagram shows the effect of the United States (US) imposing a tariff on the import of steel in 2018. [Diagram: price of steel vs quantity of steel, with domestic demand for steel, domestic supply of steel, world supply of steel, and world supply of steel plus tariff curves; points Z, T, V, U, X, W, Y; prices P1 and P; quantities Q1, Q2, Q3, Q4.] Which statement about the impact of the tariff is correct?

1. AConsumer surplus falls from P1TO to PUO.
2. BDomestic output increases from OQ1 to OQ3.
3. CImports fall from Q1Q4 to Q2Q3.
4. DThe tax revenue raised on imports is P1YWP.

As printed in the paper