Suppose That the Nominal Tariff Rate on Final Good X

question 2

Multiple Choice

Suppose that the nominal tariff rate on final good X is 10 percent and that the weighted average of the nominal tariff rates on the inputs used in producing good X is 6 percent. In this situation, the effective rate of protection (ERP) for final good industry X

• A) will be greater than 10 percent.
• B) will be greater than 6 percent but less than 10 percent.
• C) will be less than 6 percent but greater than zero percent.
• D) can be negative.

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Definitions:

Type II Error

Occurs when a statistical test fails to reject a false null hypothesis; also known as a false negative.

Level Of Significance

A threshold in hypothesis testing that determines whether or not the null hypothesis can be rejected.

Null Hypothesis

A default premise stating no statistical significance or effect, used as a starting point for hypothesis testing to be either rejected or not rejected.

Z Statistic

A statistical measure that quantifies the distance (in standard deviation units) a data point is from the mean of a data set.