Assume the free trade market price of a car is $20,000. It is having $10,000 worth of steel. The importing country imposes the 25% tariff on car imports.
1. Determine the effective rate of protection if there is no duty on the steel imports.
2. Determine the effective rate of protection if the importing country imposes a 20% tariff on steel imports.
3. Determine the effective rate of protection if there is no import tariff on the imports of either steel or copper. Assume it also takes $4000 worth of copper (besides $10,000 worth of steel) to produce a car.
4. Assume there is import duty of the 20% and 15% on imports of steel and copper, respectively. Determine the effective tariff rate.