Suppose a domestically produced motor bicycle sells at a world price of $5,000 under unrestricted trade. The domestic producer uses $3,000 worth of imported inputs. The $2,000 difference between the world price of the final motor bicycle and the cost of the imported components represents domestic value added (VA). Domestic value-added includes the payments made to domestic labor and capital inputs. Under restricted trade, domestic value-added cannot exceed $2,000, or the price of the domestically produced motor bicycle will exceed that of imported ones and the domestic ones will not sell. Suppose a 10 percent ad valorem (on the value) tariff is imposed on the imported motor bicycle.