A. Suppose a good is produced in a country from a combination of foreign parts and domestic inputs. If the good sells for $900 but requires $400 of imported parts. The domestic value added is $. b. Assuming the country cannot change the world price, a 10% tariff on the final good will cause the domestic price to rise to $ and cause the domestic value added to become $ .
c. In this case, the effective rate of protection is %. If, in addition to the 10% tariff on the final good, a 10% tariff on imported parts is levied, the effective rate of protection for domestic manufacturers becomes %.