Scenario 6.1
Suppose that United States furniture makers import $100 of wood and parts in order to make a dining room table selling for $500.The imports have no tariff of quota restrictions.
-Based on Scenario 6.1 above,if a tariff of 20 percent is placed on imports of dining room tables,the effective rate of protection is

Question

Quizplus · Accepted Answer

With a tariff of 20%, the cost of imports increases by $20, making the total cost of inputs $120. With a selling price of $500, the domestic producers are effectively protected from $380 of competition ($500 selling price - $120 cost of inputs). Therefore, the effective rate of protection is 25% ($380 protected domestic industry / $100 cost of imports)

Scenario 6.1 Suppose That United States Furniture Makers Import $100 of Wood