Question 21N.3.HL.TZ0.3j
| Date | November 2021 | Marks available | [Maximum mark: 2] | Reference code | 21N.3.HL.TZ0.3j |
| Level | HL | Paper | 3 | Time zone | TZ0 |
| Command term | Outline | Question number | j | Adapted from | N/A |
Chia seeds are an agricultural good produced in many countries and priced in US dollars (US$).
Figure 1 illustrates the market for chia seeds in a small country called Nofiberland. D is the domestic demand and S is the domestic supply for chia seeds. Chia seeds can be initially imported at the current world price of US$15.00 per kg. Sw is therefore the world supply faced in Nofiberland with free trade. To protect Nofiberland producers, the government decides to impose a US$6.00 tariff on chia seed imports. St is therefore the world supply faced in Nofiberland after the tariff is imposed.
Figure 1
Outline one reason why the imposition of the tariff would lead to a welfare loss.
[2]
Some candidates explained correctly that the loss in consumer surplus would outweigh the gains in producer surplus and tax revenue. However, it was pleasing to see the majority explaining that production would be switched from more efficient foreign producers to less efficient domestic producers.
