Effective rate of protection for widgets prodcution

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Reference no: EM1313251

Suppose you want to produce WIDGETS in your country. The international price of an imported WIDGET is $50 and pays an import tariff of $10 per unit. Three inputs are needed to produce a WIDGET. Input A is imported and has a tariff of 10%. Input B is produced domestically and does not pay any tariff, while tariff on imported input C is 50%. The input-output coefficient for input A is 0.2 and value added represents 30% of total price of WIDGETS at international prices. Calculate the effective rate of protection for WIDGETS using two alternative methods. (NOTE: Assume the values that you consider necessary in order to answer the question).

Reference no: EM1313251

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