Suppose, in a small country, that under free trade a final good F has a price of

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Suppose, in a small country, that under free trade a final good F has a price of $1,000, that the prices of the only two inputs to good F, goods A and B, are P A 5 $300 and P B 5 $500, and that 1 unit each of A and B is used in producing 1 unit of good F. Suppose also that an ad valorem tariff of 20 percent is placed on good F, while imported goods A and B face ad valorem tariffs of 20 percent and 30 percent, respectively. Calculate the ERP for the domestic industry producing good F, and interpret the meaning of this calculated ERP.
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International Economics

ISBN: 9780078021671

8th Edition

Authors: Dennis Appleyard, Alfred Field

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