Assume the United States Is a Large Consumer of Steel

question 104

Multiple Choice

Assume the United States is a large consumer of steel that is able to influence the world price. Its demand and supply schedules are respectively denoted by DU.S. and SU.S. in Figure 4.2. The overall (United States plus world) supply schedule of steel is denoted by SU.S.+W.
Figure 4.2. Import Tariff Levied by a "Large" Country ?
-Suppose that the production of $500,000 worth of steel in the United States requires $100,000 worth of iron ore.The U.S.nominal tariff rates are 15 percent for steel and 5 percent for iron ore.Given this information, the effective rate of protection for the U.S.steel industry is approximately

• A) 6 percent.
• B) 12.5 percent.
• C) 18 percent.
• D) 17.5 percent.

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