Question
Compu Global is an American firm producing computers. Compu Global imports computer components from Taiwan and assembles them domestically. Suppose that in the United States,
Compu Global is an American firm producing computers. Compu Global imports computer components from Taiwan and assembles them domestically. Suppose that in the United States, a computer sells for $500 and that 60% of the computer’s value comes from the value of the imported components. The United States imposes a 50% tariff on computers and a 10% tariff on the computer’s components. Assume that costs of producing components are the same in the United States and Taiwan and that transit costs are nonexistent.
Based on the information provided, Calculate the effective rate of protection that Compu Global receives from the tariff?
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International Economics
Authors: Robert Carbaugh
18th Edition
0357518918, 978-0357518915
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