Gr12 3.

1 Test [20 marks]
1a. [2 marks]
Increase tariff on foreign chicken
1. In the country of Trinidad and Tobago, it has been reported that the price of domestic
chicken (poultry) will not increase in the near future, even if the government
introduces a higher tariff on imported whole chicken from the United States.

2. The Poultry Association of Trinidad and Tobago (PATT) hosted a news conference to
reduce public concerns about reports of an increase in poultry prices. The association
says that there will be an increase in prices, but this will only be on imported chicken.
However, economists know that this will not be the case.

3. The association is insisting that the current 40 % tariff on imported chicken be

increased to 80 % to make things fairer between domestic and imported chicken. They
argue that Trinidad and Tobago’s poultry industry has been operating at a major
disadvantage in comparison with other Caribbean nations. For instance, Barbados has
a 180 % tariff on imported chicken, Jamaica 280 % and Guatemala 257 %.

4. The President of PATT said imported chicken was hurting the local industry, with
some firms in danger of shutting down. “Chickens are remaining longer on farms, and
it’s not because we want to keep them as pets, it’s because they are not selling,” he
said.

5. A domestic poultry producer said the local industry had to compete with goods that
came from the United States, the European Union and Brazil, which were heavily
subsidized by their governments. “We don’t need subsidies and the government
cannot afford to pay us any. We want the tariff. We don’t want to ban imported
chicken; once the tariff is on, everything will be fine.”

6. Trinidad and Tobago imports two types of chicken. The first type, “mechanically
deboned meat (MDM)”, is used to make processed meat products, such as chicken
sausages and chicken burgers. The second type is whole chickens. There is a quota on
MDM chickens at 0 % tariff because domestic producers have accepted that they
cannot meet the local demand by firms.
7. However, there is a concern that the importers are abusing this tariff-free access to
bring whole chicken into the domestic market. Data from customs show that 3.29
million kilograms of chicken was imported in August, but almost 75 % was brought in
duty-free.

8. Local chicken sells for approximately $4.50 per kilogram while imported chicken,
according to PATT’s information from Customs, is about $1 to $2 per kilogram. “That
just covers the cost of shipping the chicken. If these figures are correct, there is
something very wrong,” said the domestic producer.

9. The poultry industry makes up 60 % of the agriculture sector in Trinidad and Tobago
and generates over 10 000 jobs and $1 billion in revenue.

Define the term quota indicated in bold in the text (paragraph [6]).

Markscheme
Level 
0 The work does not reach a standard described by the descriptors below. [0]
1 Vague definition. [1]
The idea that it is to do with a restriction on imports.
2 Accurate definition. [2]
An explanation that it is a physical limit on the number or value of a good that can be
imported into a country.

Examiners report
Most candidates were able to define the term accurately, although a few simply stated that
it was a restriction on imports, without specifying what it actually was.
1b. [2 marks]
List two reasons why the government might wish to protect the domestic poultry industry.

Markscheme
Level 
0 The work does not reach a standard described by the descriptors below. [0]
1 Vague definition. [1]
Any one of the following reasons:
• to protect jobs
• to ensure higher revenues for domestic chicken producers
• to reduce the potential impact on growth as the industry makes up 60 % of the
agriculture sector
• to compensate for the subsidies given to foreign producers
• to improve the balance of payments
• to earn government tariff revenue
• to protect safety standards
• to counteract dumping.
2 Accurate definition. [2]
Any two of the following reasons:
• to protect jobs
• to ensure higher revenues for domestic chicken producers
• to reduce the potential impact on growth as the industry makes up 60 % of the
agriculture sector
• to compensate for the subsidies given to foreign producers
• to improve the balance of payments
• to earn government tariff revenue
• to protect safety standards
• to counteract dumping.

Examiners report
There are many reasons for protectionism and on the whole, this question was well-
answered. Lower achieving candidates repeated the text, without giving a reason. Some
candidates wrote far too much here, ignoring the command term “list” and writing a mini-
essay. This is not to be recommended and candidates should be advised to pay careful
attention to the command term and marks allocated to a question.
1c. [4 marks]
Using an appropriate diagram, explain the likely effect that the suggested increase in the
tariff (paragraph [3]) would have on the domestic production of poultry.

Markscheme
Level 
0 The work does not reach a standard described by the descriptors below. [0]
1 There is a correct diagram or an accurate written response. [1–2]
For drawing a correctly labelled tariff diagram to show an increase in the tariff through an
upward shift of the world supply + tariff curve and an increase in domestic production or
an explanation that there would be an increase in domestic production as the price of
chicken rises (or as imports decrease).
2 There is a correct diagram and an accurate written response. [3–4]
For drawing a correctly labelled tariff diagram to show an increase in the tariff through an
upward shift of the world supply + tariff curve and an increase in domestic production and
an explanation that there would be an increase in domestic production as the price of
chicken rises (or as imports decrease).
Candidates who do not recognize that there is an increase in the tariff and simply show the
imposition of a tariff can be rewarded with a maximum of [1 mark] for the diagram. If the
explanation correctly refers to an increase in domestic production, [2 marks] may be
awarded.
Candidates who incorrectly label diagrams can be rewarded with a maximum of [3 marks].
The use of P and Q on the axes is sufficient for a demand and supply diagram. The world
supply curve with the tariff should be labelled Sw+T or Sworld+ tariff.
A title is not necessary.
Examiners report
Higher achieving candidates answered the question using a tariff diagram, with an increase
in the tariff. They explained that this would increase the domestic production of poultry,
using information from the diagram.
There were two main weaknesses found in the responses to this question. One group of
candidates simply ignored the question and provided a standard tariff diagram, without an
increase in the tariff, and so were not really answering the question that was being asked.
The second group drew the diagram and then wrote at extreme length about the whole
diagram, identifying all the different areas of revenue loss and/or gain, and also bringing in
the concepts of consumer surplus and welfare loss. This sometimes resulted in time
management issues when answering part (c) and (d) questions.
1d. [4 marks]
Using an AD/AS diagram, suggest what will happen to employment if imports continue to
damage the domestic poultry industry.

Markscheme
Level 
0 The work does not reach a standard described by the descriptors below. [0]
1 There is a correct diagram or an accurate written response. [1–2]
For drawing a correctly labelled AD/AS diagram with a shift of the AD curve to the left or
for explaining that increasing imports will reduce AD (net exports), which will reduce real
national output, thus reducing employment in the economy.
2 There is a correct diagram and an accurate written response. [3–4]
For drawing a correctly labelled AD/AS diagram with a shift of the AD curve to the left and
for explaining that increasing imports will reduce AD (net exports), which will reduce real
national output, thus reducing employment in the economy.
Candidates who incorrectly label diagrams can be rewarded with a maximum of [3 marks].
For AD/AS, the vertical axis may be price level or average price level.
The horizontal axis may be output, real output, national output, real national output,
national income, or GDP. A title is not necessary.

Examiners report
A significant number of candidates struggled to establish the appropriate focus for this
question. They mostly realised that employment would fall, but could not explain the
reason in terms of AD and AS. They did not seem to realise that imports are a negative
component of AD and that increasing imports would shift AD to the left, reducing real GDP
and thus the need for workers in the industry, which would be significant in Trinidad and
Tobago, since it “makes up 60% of the agricultural sector” and “generates over 10,000 jobs
and $1 billion in revenue”.
1e. [8 marks]
Using information from the text/data and your knowledge of economics, discuss the
arguments for and against the protection of the domestic poultry market.

Markscheme
Examiners should be aware that candidates may take a different approach which, if
appropriate, should be rewarded.
Do not award beyond Level 2 if the answer does not contain reference to the information
provided.
Level 
0 The work does not reach a standard described by the descriptors below. [0]
1 Few relevant concepts are recognized. [1–2]
There is basic knowledge/understanding.
2 Relevant concepts are recognized and developed in reasonable depth. [3–5]
There is clear knowledge/understanding.
There is some attempt at application/analysis.
3 Relevant concepts are recognized and developed in reasonable depth. [6–8]
There is clear knowledge/understanding.
There is effective application/analysis.
There is synthesis/evaluation, supported by appropriate theory and evidence.
Command term
“Discuss” requires candidates to offer a considered and balanced review that includes a
range of arguments, factors or hypotheses. Opinions or conclusions should be presented
clearly and supported by appropriate evidence.
Responses may include:
• a definition of trade protection
• Arguments for trade protection
- it will make things “fairer” between local and imported markets (paragraph [3])
- it will protect employment in the local industry (paragraph [9])
- it will protect employment in other, connected industries
- increased tariff revenue for the government
- local producers cannot compete (paragraph [8])
- there are hints of dumping taking place since the producers in the US, the EU and
Brazil are heavily subsidized (paragraph [8])
- the government cannot afford subsidies therefore a tariff is justified (paragraph [5])
- Trinidad and Tobago has the lowest tariff in the region (paragraph [3]) so a higher
tariff may be justified
- the industry is important to the economy for both jobs and revenue (paragraph [9])
- agriculture is important for self-sufficiency
• Arguments against trade protection
- it may raise the price to consumers, despite reassurances (paragraph [1])
- it may raise the price to producers who buy the imported chicken as an input for
their final product
- competition may diminish and local producers may become inefficient
- it may lead to retaliation from other countries
- it may reduce consumption of chicken
- equity issue, since spending on food is likely to represent a substantial proportion of
income of low income households
- welfare loss
- misallocation of world’s scarce resources.
Any reasonable discussion.

Examiners report
Higher achieving candidates introduced arguments for and against protectionism,
supported by evidence from the text. They considered possible consequences for the
economy or for stakeholders and the relative significance of the arguments.
Lower achieving candidates presented a standard list of arguments for and against
protectionism, without enough explanation and without making points relevant to the
particular experience of Trinidad and Tobago.
Printed for Northbridge International School
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