If there is no tariff on imported inputs and the value of these inputs is half the value of the final product, what is the effective tariff rate when the nominal tariff on the final product is 10%?

Multiple choice question for Tariffs. Select an option, then review the explanation below.

Explanation

Given that imported inputs have no tariff and constitute 50% of the final product's value, the effective tariff rate is higher than the nominal rate. The calculation is: Effective Tariff Rate = Nominal Tariff / (1 - ratio of imported inputs) = 10% / (1 - 0.5) = 20%. Hence, the effective tariff rate is 20%.

Practice related questions from the same subject.

1.Under a free trade system, what is the total worth of imports?
2.What do empirical studies generally indicate about the nature of U.S. import tariffs?
3.Which of the following statements about government trade policies is NOT typically true?
4.If the nominal tariff on finished computers is 12% and the weighted average nominal tariff on the inputs for making computers is 18%, what can be said about the effective rate of protection for the computer sector?
5.If Pakistan applies a tariff on ballpoint pens consisting of 25 rupees per pen plus 12% of the pen's price, what type of tariff is this an example of?

If there is no tariff on imported inputs and the value of these inputs is half the value of the final product, what is the effective tariff rate when the nominal tariff on the final product is 10%?

Explanation

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