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10 March, 22:08

Calculate the effective rate of protection for the domestic MP3 player industry following the imposition of a 20 percent tariff on the imports of MP3 players. The cost of material inputs used in the production of MP3 players in the country is $100 per unit, and there is free trade in these material inputs. The world price of MP3 players is $175 per unit. Assume that the country is a small country.

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  1. 10 March, 23:40
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    effective rate of protection for the domestic is 46 %

    Explanation:

    given data

    imposition = 20 percent

    cost of material inputs = $100 per unit

    world price = $175 per unit

    solution

    we get here Extra amount that is

    Extra amount = world price * tariff mean ... 1

    Extra amount = $175 * $20%

    Extra amount = $35

    and

    So we get effective rate of protection for the domestic is

    effective rate of protection = 35 : (175-100)

    effective rate of protection = 46 %
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