A major American knives producer makes its custom products out of a combination of domestic and foreign
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A major American knives producer makes its custom products out of a combination of domestic and foreign parts, especially steel.
a. If a custom knife sells for $216 and the value added is 30 percent, what is the value of imported parts?
b. If the country imposes a 15 percent tariff on steel, what happens to the price of the knife? What happens to the domestic consumption and imports?
c. What is the effective rate of protection?
d. If a 25 percent tariff is levied on custom knives, what is the effective rate of protection?
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