Other things equal, which one of the following will cause an increase in the effective rate of protection (ERP) in the automobile industry?
A) a decrease in the nominal tariff rate on automobiles
B) an increase in the nominal tariff rates on imported inputs used in making automobiles
C) an increase in the world price of imported inputs used in making automobiles
D) a decrease in the nominal tariff rates on imported inputs used in making automobiles

Question

Quizplus · Accepted Answer

A decrease in the nominal tariff rates on imported inputs reduces the cost of inputs, thereby increasing the value added in the domestic production process, which raises the effective rate of protection.

Other Things Equal, Which One of the Following Will Cause