Suppose That the World Price of Automobiles Is $20,000 and Automobile

question 45

Essay

Suppose that the world price of automobiles is $20,000 and automobile manufacturers in country A use $10,000 worth of imported inputs and no domestic inputs. What is the effective rate of protection for the automobile industry in country A, if there is a tariff of 25 percent on imported automobiles and a tariff of 50 percent on imported inputs used in this industry?

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Definitions:

Income Statements

Financial statements that show a company's revenue, expenses, and profits over a specific period of time, typically a quarter or a year.

Common-Size Financial Statements

Financial statements that present all line items as percentages of a common base figure, facilitating comparison across periods or companies.

Actual Transactions

The completed deals or exchanges of goods, services, or financial instruments between parties.

Financial Ratios

Quantitative measures derived from financial statements used to assess a company's performance, financial health, and profitability.