In a given country, automobiles industry sells a car for 20,000$ that has a cost in imported parts of 15,000$. To encourage domestic automobile industry, the country puts 20% tariff on imported cars. Also, the government is looking for revenues, thus the government impose a tariff of 10% on imported parts. What the rate of Effective Protection? What the rate of tariff that the government should impose to double the rate of effective protection?
In a given country, automobiles industry sells a car for 20,000$ that has a cost in imported parts of 15,000$. To encourage domestic automobile industry, the country puts 20% tariff on imported cars. Also, the government is looking for revenues, thus the government impose a tariff of 10% on imported parts. What the rate of Effective Protection? What the rate of tariff that the government should impose to double the rate of effective protection?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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