Suppose that bicycles are made in the United States out of a combination of domestic and foreign parts. a. If a bike sells for $500 but requires $300 of imported parts, what is the domestic value added? b. If a 20 percent tariff is levied on bikes of the same quality and with the same features, how do the price and the domestic value added change? (Assume the United States cannot cause the world price to change.) c. What is the effective rate of protection?
Suppose that bicycles are made in the United States out of a combination of domestic and foreign parts. a. If a bike sells for $500 but requires $300 of imported parts, what is the domestic value added? b. If a 20 percent tariff is levied on bikes of the same quality and with the same features, how do the price and the domestic value added change? (Assume the United States cannot cause the world price to change.) c. What is the effective rate of protection?
Principles of Microeconomics (MindTap Course List)
8th Edition
ISBN:9781305971493
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter9: Application: International Trade
Section: Chapter Questions
Problem 5PA
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