What is the effective rate of protection

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Reference no: EM138133

Q1. Firm ABC measured its MP of labor curve to be the following:

MP = 4000 - 2L where L is the number of hours of labor hired per day.

ABC produces gadgets that are sold for $20 each and is able to hire workers for $10 for every hour. Elucidate for how many hours of labor should ABC hire each day to maximize its profits?

Q2. 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?

Reference no: EM138133

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