Question

X COD Suppose that United States furniture makers import $100 of wood and parts in order to make a dining room table that sells for $500. The wood and parts imports have no tariff or quota restrictions. The U.S. places a tariff of 40% on dining tables. This means the value added will increase from. The effective rate of protection is_ Assume the U.S. is a small country. $400 to $500, 40% $400 to $600, 50% $400 to $500, 40% $400 to $600,50% Question 16 3 pts A country imposes a $10 per unit tariff on a good. If the country is what economists call "large,' the domestic price of the good in the country will Increase by more than 510 increase by $10 increase by less than 510 decrease by less than 510

Answer 1

1) Solution: $400 to $600; 50%
Value added before tax = $400; Unit price = $600
After imposed tariff dining table increases with 40% i.e. $700;
Value added after tax = $700 - $100 = $600
Effective rate = 200/400 * 100 = 50%

2) Solution: increase by more than $10
Explanation: A tariff on import by a large country will result to an increase in the domestic price of the import good