Raul owns a small farm that grows oranges. His farm is based in country Z. Like all primary sector activities, farming creates external costs and external benefits. Raul sells all 600 tonnes of his oranges direct to a drinks manufacturer in country E. The Government of country E plan to introduce either import tariffs or quotas. Raul said: 'This might help country E's Government achieve one of its economic objectives but how will it affect companies that export to country E?'

Mark scheme

Marking points from the official mark scheme (May/June 2021). The mark or mark type is shown in brackets.

1. [2] Extracts and uses the natural resources of the earth to produce raw materials used by other businesses
2. [2] The sector that generates raw materials which the secondary sector then uses to make a product
3. [2] Firms whose business activity involves the extraction of raw materials
4. [1] Partial definition e.g. Involves natural resources
5. [1] Generate/produce raw materials
6. [1] Low(er) unemployment / full employment / high(er) level of employment
7. [1] Economic growth / increase in GDP / improve standards of living
8. [1] Low inflation / price stability
9. [1] Improve balance of payments
10. [1] Jobs created [k] on the farm [app]
11. [1] Pay taxes [k] on the oranges [app]
12. [1] Other businesses move into area [k]
13. [1] Trees release oxygen / planting trees improve air quality / trees absorb carbon dioxide [k]
14. [1] Loss of space / land use [k] to produce 600 tonnes [app]
15. [1] Pollution/congestion [k] caused by exporting [app]
16. [1] Deplete natural resources / use up water [k]
17. [1] No need for intermediaries / middlemen [k] increasing profit margin [an] for the farm [app]
18. [1] More predictable demand [k] which makes planning easier [an]
19. [1] Better understand customer needs [k] such as which type of oranges [app] which can help maintain customer loyalty / sales [an]
20. [1] Can sell in large quantity / does not need to deliver to many businesses [k] as sell all to drinks manufacturer [app] which can reduce distribution / transport cost [an]
21. [1] Less paperwork / saves time as have to deal with fewer / one customer [k] which reduces administration costs [an]
22. [1] Less / no need for marketing [k] as does not need to find retailers to buy his oranges [app] which reduces cash outflows [an]
23. [k] May lead to an increase in the price of goods / makes goods more expensive [an] which makes the products less competitive / leading to fewer sales / less revenue
24. [k] Business may decide to maintain prices / not pass on price increase to customers [an] reducing profit margin
25. [k] Will limit the amount of goods that can be brought into a country [an] which will reduce the supply / reducing potential sales / revenue
26. [k] May have to find new market for remaining products / store leftover inventory [an] increasing storage costs / increasing total cost
27. [eval] Quotas will limit the amount of goods that can be brought into a country [k] which reduces the supply [an]. Whereas tariffs could increase the price of goods [k] leading to lower demand [an]. I think tariffs are likely to have less effect as at least you can still export the amount you want [eval] and customers may still be prepared to pay the extra whereas quotas could reduce or restrict the possibility of any sales. [eval]