Suppose that bicycles are made in the United States out of a combination of domestic and foreign parts. a. If a bike sells for $500 but requires $300 of imported parts, what is the domestic value added? b. If a 20 percent tariff is levied on bikes of the same quality and with the same features, how do the price and the domestic value added change? (Assume the United States cannot cause the world price to change.) c. What is the effective rate of protection?

Suppose that bicycles are made in the United States out of a combination of domestic and foreign parts. a. If a bike sells for $500 but requires $300 of imported parts, what is the domestic value added? b. If a 20 percent tariff is levied on bikes of the same quality and with the same features, how do the price and the domestic value added change? (Assume the United States cannot cause the world price to change.) c. What is the effective rate of protection?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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