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
A)20 percent.
B)25 percent.
C)30 percent.
D)40 percent.

Question

Quizplus · Accepted Answer

The effective rate of protection is calculated by adding the tariff rate to the percentage of imported inputs' value in the final product.

In this case, the tariff rate is 20%, and the imported inputs used in the production of dining room tables are valued at 20% of the final product value (as stated in the scenario).

Therefore, the effective rate of protection is 20% (tariff rate) + 5% (imported inputs value in the final product) = 25%.

Hence, the best choice is B.