WAEC Economics 2023 Theory — Question 8

Model answer

(a) An embargo is an outright ban instituted on the import or export of a good or service. (b) Reasons for imposing tariffs: (i) It is used to protect infant/local industries to be able to stand on their feet and expand. (ii) It is a means of helping increase employment in the home country. (iii) It is a means of raising revenue for the imposing country. (iv) It helps countries with long-term balance of payments problems to correct them. (v) It is a measure to control dumping. (vi) It is used to control the consumption of products considered harmful. (vii) It can be used as a retaliatory measure against other imposing countries. (c) Reasons against the use of tariffs: (i) It can lead to possible retaliation from affected countries. (ii) Protection of local firms do not encourage them to grow, they produce low standard goods since there is little or no competition. (iii) It may lead to loss of revenue for the imposing government depending on the elasticity of demand for imports and exports. (iv) It can lead to smuggling of products considered harmful and also of other products to evade tax. (v) Consumers in the home country are denied the opportunity of choosing from a variety of imports. (vi) It may lead to contraction of total world output.