4.2 Types of trade protection questions for IB Economics
142 questions on Types of trade protection, written by Augment in the style of IB exam papers. Six of them are below in full, to answer on paper.
- IB Economics
- Part of 4 The global economy
- SL and HL
Questions by paper and level
SL and HL questions are for students at either level. HL only questions cover what only HL students study.
| Paper | SL and HL | HL only | All |
|---|---|---|---|
| Paper 1 | 38 | 3 | 41 |
| Paper 2 | 60 | 23 | 83 |
| Paper 3HL only | 0 | 18 | 18 |
| Every paper | 98 | 44 | 142 |
Counted on
Questions to try
Written by Augment in the style of IB exams, not past papers. Answer them on paper, then check each one against its markscheme with a free account.
Open economies are linked to the rest of the world through spending on exports and imports.
- (a)
Using the circular flow of income model, explain how a fall in exports combined with a rise in spending on imports could reduce a country's national income.
10 marks
- (b)
Using real-world examples, discuss the view that trade protection is necessary to protect domestic jobs.
15 marks
Read the extracts and answer the questions that follow.
Text A — Overview of Veloria
[1] Veloria is a lower-middle-income country in East Africa with a population of 38 million. Its main exports are tea, cut flowers and tourism services. Over the past decade the share of the population living in towns and cities has risen from 28 % to 34 %, and the capital, Tirraport, has become one of the fastest-growing cities in the region.
[2] Economic growth has been strong, driven mainly by household consumption and by construction. However, inflation has risen above the central bank's target of 5 %, partly because of higher prices for imported food and fuel. Unemployment remains high, especially among young people in rural areas.
[3] Imports of fuel, machinery and milk powder have grown faster than exports, and the current account deficit has widened. The Velorian shilling (VLS) floats freely and has experienced a significant depreciation against the US dollar since 2022.
[4] Around 37 % of Velorians live below the national poverty line, most of them in rural areas, where farming employs about 60 % of the labour force. Access to electricity, clean water and secondary schooling outside the cities remains limited.
Table 1: Selected economic data for Veloria
2022 | 2023 | 2024 | |
|---|---|---|---|
Real GDP growth (%) | 5.8 | 6.1 | 6.4 |
Inflation (annual % change in CPI) | 6.2 | 7.5 | 8.9 |
Unemployment (% of labour force) | 9.8 | 9.4 | 9.1 |
Exchange rate (VLS per US$) | 115 | 124 | 138 |
Current account balance (% of GDP) | −4.1 | −5.0 | −5.6 |
Text B — A growing appetite for dairy
[1] Demand for packaged milk, yoghurt and cheese in Velorian cities has grown rapidly. Market researchers point to three causes: the growing number of urban households, rising urban incomes, and a change in tastes towards convenient, packaged foods sold in supermarkets. Packaged milk is a normal good for urban households.
[2] The falling price of refrigerators, which are now produced by two large factories in Tirraport, has also allowed many more urban households to store fresh dairy products at home.
[3] Domestic supply has struggled to keep up. Most of Veloria's milk comes from 1.8 million smallholder farmers who keep two or three cows each. Yields are low, and up to a third of milk spoils before reaching market because there are few cooling centres. The average price of a litre of packaged milk in Tirraport rose from VLS 95 in 2022 to VLS 120 in 2024, and imports of milk powder rose from US$40 million to US$95 million over the same period.
[4] Supermarket chains say they would prefer to buy from domestic dairies, but supply is unreliable, so they import long-life milk and milk powder from abroad. Two large processing firms have announced plans to expand their plants if they can secure a steady supply of raw milk.
Table 2: Average monthly data for an urban household in Veloria
2022 | 2024 | |
|---|---|---|
Household income (VLS) | 48 000 | 57 600 |
Purchases of packaged milk (litres) | 12.0 | 15.0 |
Text C — The Dairy Forward programme
[1] In 2025 the government launched the Dairy Forward programme to raise domestic milk production. It will subsidize improved animal feed and the construction of 400 village cooling centres, and it will train farmers in animal health. It will also impose a 25 % tariff on imported milk powder.
[2] Supporters argue that the programme will raise the incomes of some of the poorest rural households, create jobs and reduce spending on imports. Dairy farming is labour intensive, and every additional 1 000 cows is estimated to create around 150 jobs in farming, transport and processing.
[3] Environmental groups warn that larger herds near Lake Tirra, the country's main source of drinking water, are already polluting the lake with manure and fertilizer runoff, and that forests are being cleared for pasture.
[4] Consumer groups argue that the tariff will raise milk prices for low-income urban families. The finance ministry notes that the government's budget deficit is already 6 % of GDP and that the programme will cost about 0.4 % of GDP each year for five years.
- (a)(i)
Define the term depreciation indicated in bold in the text (Text A, paragraph 3).
2 marks
- (a)(ii)
Define the term normal good indicated in bold in the text (Text B, paragraph 1).
2 marks
- (b)(i)
Using information from Table 2, calculate the income elasticity of demand (YED) for packaged milk for an urban household in Veloria between 2022 and 2024.
2 marks
- (b)(ii)
Using your answer to (b)(i), state whether demand for packaged milk among urban households is income elastic or income inelastic.
1 mark
- (b)(iii)
Using information from Table 1, calculate the percentage change in the value of the Velorian shilling against the US dollar between 2022 and 2024.
2 marks
- (c)
Using a demand and supply diagram, explain why the price of packaged milk in Tirraport rose between 2022 and 2024 (Text B, paragraphs 1 and 2).
4 marks
- (d)
Using an AD/AS diagram, explain how the growth in household consumption may have contributed to the rise in Veloria's inflation rate (Text A, paragraph 2 and Table 1).
4 marks
- (e)
Using an exchange rate diagram, explain why the Velorian shilling depreciated against the US dollar (Text A, paragraph 3).
4 marks
- (f)
Using an externalities diagram, explain why the expansion of dairy farming near Lake Tirra may lead to market failure (Text C, paragraph 3).
4 marks
- (g)
Using information from the text/data and your knowledge of economics, evaluate the Dairy Forward programme as a response to the rising demand for dairy products in Veloria.
15 marks
Imported used cars in Pemaru
Pemaru is a lower-middle-income island economy in the Pacific Ocean. It has no car industry, and almost all of the 18 000 cars bought by households and firms each year are used cars imported from high-income economies, where they are bought at auction in US dollars.
Pemaru's currency, the pemar (PMR), floats freely. A fall in the world price of Pemaru's main export, copper, has weakened the currency (Table 1).
Table 1: Exchange rate of the pemar, 2023 and 2025
2023 | 2025 | |
|---|---|---|
Exchange rate (PMR per US$) | 4.00 | 5.00 |
- (a)(i)
The average auction price of a used car exported to Pemaru was US$3200 in both 2023 and 2025.
Using Table 1, calculate the change in the price of this car in pemars between 2023 and 2025.
2 marks
- (a)(ii)
Using Table 1, calculate the percentage change in the value of the pemar against the US dollar between 2023 and 2025. You must state whether the pemar appreciated or depreciated.
2 marks
- (a)(iii)
The government charges a tariff of 25 % on the value of every imported used car. In 2025, 18 000 used cars were imported at an average value at the border, before the tariff, of PMR 16 000.
Calculate the government's tariff revenue from imported used cars in 2025.
2 marks
- (a)(iv)
A 2025 government inspection of 600 imported used cars found that the odometer (mileage counter) of about one car in three had been wound back before export, so the car appeared to have been driven much less than it had.
Outline why odometer tampering is an example of asymmetric information.
2 marks
- (a)(v)
Using a demand and supply diagram and the information provided, explain the effect of the change in the exchange rate on the market for imported used cars in Pemaru.
4 marks
- (a)(vi)
Some importers pay an independent agency to inspect each car before it is shipped and issue a certificate confirming its mileage and condition. In 2025, cars sold with a certificate sold for an average of PMR 21 600, while similar cars sold without a certificate sold for an average of PMR 17 400.
Calculate the percentage price premium earned by cars sold with a certificate.
2 marks
- (a)(vii)
Using the information provided, explain two consequences of odometer tampering for the market for used cars in Pemaru.
4 marks
- (a)(viii)
Outline one reason why an inspection certificate may not fully remove asymmetric information between importers and buyers.
2 marks
- (b)
The government of Pemaru is considering the following measures:
Mandatory pre-shipment inspection: every imported used car must be inspected by a government-approved agency in the exporting country; the cost of about US$150 per car would be paid by importers.
Age limit: a ban on imports of cars more than eight years old; about 45 % of cars imported in 2025 were older than this, and newer cars cost on average 60 % more.
Vehicle register: the odometer reading of every car would be recorded on arrival and at each annual roadworthiness test, and buyers could check it online; the system would cost PMR 9 million to set up.
Consumer protection law: buyers would have the legal right to a full refund if a car's mileage is shown to have been altered; courts are slow and legal advice is expensive.
Higher tariff on older cars: the tariff on cars more than eight years old would rise from 25 % to 40 %.
Using the information provided and your knowledge of economics, recommend a policy that the government of Pemaru could introduce to reduce the effects of asymmetric information in the market for imported used cars.
10 marks
Imported goods and domestically produced goods often compete for the same consumers.
- (a)
Explain how a rise in the price of imported goods can increase the demand for domestically produced substitutes and reduce the demand for goods that are complements to the imports.
10 marks
- (b)
Using real-world examples, discuss the view that tariffs are the most effective way to protect domestic producers from foreign competition.
15 marks
Read the extract and answer the question that follows.
Text A — Auremo Motors looks to Tamaran
[1] Auremo Motors is a car manufacturer based in a high-income economy where car sales have barely grown for a decade. It plans to build an assembly plant in the Republic of Tamaran, a lower-middle-income economy in Southeast Asia with a population of 95 million.
[2] Tamaran's real gross domestic product (GDP) per capita has grown by an average of 6 % a year since 2015, and the number of households earning more than US$15 000 a year is expected to double by 2032. However, growth fell to 1 % in 2020 and Tamaran's currency lost 25 % of its value against the US dollar in 2022.
[3] Auremo's market research has estimated the income elasticity of demand (YED) for different forms of transport in Tamaran (Table 1).
[4] Most households in Tamaran currently travel by motorcycle or bus. Two domestic car makers sell small cars at prices about 20 % below Auremo's. Cars imported from outside the region face a 40 % tariff, which Auremo would avoid by assembling cars locally. Tamaran's government plans to raise fuel taxes and to offer subsidies for electric vehicles from 2028.
Table 1: Estimated income elasticities of demand in Tamaran
Product | Estimated YED |
|---|---|
Small cars | 1.8 |
Sport utility vehicles (SUVs) and premium cars | 3.0 |
Motorcycles | −0.4 |
Bus travel | −0.7 |
Using information from the text and data and your knowledge of economics, discuss the importance of income elasticity of demand for Auremo Motors' plans to expand in Tamaran.
15 marks
The flour milling cartel in Belmoria
Belmoria is a lower-middle-income country in North Africa where bread is the main staple food. In 2025 the Belmorian Competition Commission found that the country's four flour millers had operated a cartel from 2018 to 2024, agreeing prices through the Millers' Association, which published a recommended price list every month. Imports of flour face a tariff of 35 %.
Table 1: The Belmorian flour market
2017 (before the cartel) | Annual average, 2018–2024 | |
|---|---|---|
Price of flour (BLM per tonne) | 420 | 504 |
Quantity sold (thousand tonnes per year) | 900 | 810 |
BLM = Belmorian mark
- (a)(i)
Using Table 1, calculate the percentage increase in the price of flour.
2 marks
- (a)(ii)
Using Table 1 and your answer to (a)(i), calculate the price elasticity of demand (PED) for flour.
2 marks
- (a)(iii)
Using your answer to (a)(ii), state whether the millers' total revenue rose or fell as a result of the cartel's price increase.
1 mark
- (a)(iv)
Using Table 1, calculate the amount by which buyers of flour were overcharged each year during the cartel.
2 marks
- (a)(v)
Distinguish between a cartel and tacit collusion.
3 marks
- (a)(vi)
Using a diagram and the information provided, explain the effect of the cartel on consumer surplus in the flour market.
4 marks
- (a)(vii)
The Commission's investigation revealed how the two largest millers, Grano and Molitor, assessed whether to keep to their agreed output quotas. Table 2 shows their estimated annual profits (BLM million). In each cell, Grano's profit is shown first.
Table 2: Estimated annual profits of Grano and Molitor (BLM million)
Molitor keeps to quota
Molitor exceeds quota
Grano keeps to quota
36, 30
27, 37
Grano exceeds quota
44, 22
31, 25
Using Table 2, show that Grano had an incentive to exceed its quota.
2 marks
- (a)(viii)
Using the information provided, explain two reasons why the cartel was able to survive for seven years despite the incentive to cheat.
4 marks
- (b)
The following options are being considered:
Raise the maximum fine for cartels from 5 % to 10 % of a firm's annual turnover.
Introduce a leniency programme under which the first cartel member to report a cartel pays no fine. Belmoria currently has no such programme.
Make taking part in a cartel a criminal offence for company directors, with prison sentences of up to five years.
Reduce the import tariff on flour from 35 % to 5 %. Government revenue from the tariff was BLM 14 million in 2024, and domestic millers employ 6 000 workers.
Ban trade associations from publishing recommended prices.
Set a maximum price for flour of BLM 430 per tonne.
Using the information provided and your knowledge of economics, recommend a policy the government of Belmoria could introduce to prevent cartels in the flour market in the future.
10 marks
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More questions in The global economy
- 4.1Benefits of international trade
- 4.2Types of trade protectionThis page
- 4.3Arguments for and against trade protection
- 4.4Economic integration
- 4.5Exchange rates
- 4.6Balance of payments
- 4.7Sustainable development
- 4.8Measuring development
- 4.9Barriers to economic growth and development
- 4.10Growth and development strategies
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