Assume the United States Is a Large Consumer of Steel

question 29

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 a $30,000 automobile in Canada requires $10,000 worth of steel.The Canadian nominal tariff rates for importing these goods are 25 percent for automobiles and 10 percent for steel.Given this information, the effective rate of protection for the Canadian automobile industry is approximately

• A) 15 percent.
• B) 32 percent.
• C) 48 percent.
• D) 67 percent.