Economics (AS & A Level) · May / June 2025 · Paper 31 · Question 29

The diagram shows the effect of trade creation if a tariff is removed. [diagram: price/quantity axes with domestic supply, domestic demand, world supply (with tariff) at P1, world supply (without tariff) at P2, quantities Q3, Q1, Q2, Q4, and areas v, w, x, y] Which areas show the total net gain to the domestic economy?

1. Av, w, x and y
2. Bv, w and x only
3. Cw and x only
4. Dw and y only

As printed in the paper