Given the Following Information for Industry X in Country A

question 7

Multiple Choice

Given the following information for industry X in country A, and assuming that at least some of input Y is imported, that one unit of Y is required for each unit of X, and that country A is a "small" country:
$\begin{array}{lcc}&\text { free trade price }&\text {nominal tariff rate }\\\text { final product X } & \$ 100 & 19 \% \\\text { input Y (only input to X) } & \$ 70 & 10 \%\end{array}$
The effective rate of protection (ERP) for industry X is __________ percent.

• A) 9
• B) 19
• C) 30
• D) 40

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Definitions:

Economic Profit

A measure of profitability calculated by subtracting both explicit and implicit costs from total revenues, reflecting the true economic performance of a business.

Implicit Costs

Represent the opportunity costs of using resources that a firm already owns for production, instead of allocating them for other purposes.

Economic Profits

The margin between total earnings and all incurred costs, accounting for both obvious and concealed expenses.

Accounting Profits

Net income reported on a company's financial statements, calculated as total revenues minus explicit costs, excluding opportunity costs.