6 . ( a ) Autoland wants to set up an automobile industry. The free trade...
Question:
a Autoland wants to set up an automobile industry.
The free trade price of an automobile is $ and the imports of autocomponents which go into the making of an automobile are priced at $ Answer the following questions:
i If the government imposes an ad valorem tariff of percent on automobile imports, what is the effective rate of protection ERP offered to the industry?
ii Suppose Autoland wants to set up its own autocomponents industry and hence the government imposes an ad valorem tariff of percent on imports of auto components, with no tariffs on automobiles. What would be the new ERP offered to the automobile industry?
iii In continuation to Part i now suppose, the government of Autoland imposes an ad valorem tariff of percent on imports of autocomponents along with the existing tariff on automobiles. What would be the new ERP offered to the automobile industry?
iv Critically analyze which of the three policies used by the government of Autoland to develop its own automobile industry, protects the domestic automobile producers the most.
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr