Problem1 explain why a countrys use of preferential duties, Ask an Expert

Economics

Problem

1. Explain why a country's use of preferential duties is inconsistent with MFN treatment of trading partners by that country.

2. Why do you suppose that there has been such a proliferation of different instruments of protection?

3. Suppose, in a small country, that under free trade a final good F has a price of $1,000, that the prices of the only two inputs to good F, goods A and B, are PA 5 $300 and PB 5 $500, and that 1 unit each of A and B is used in producing 1 unit of good F. Suppose also that an ad valorem tariff of 20 percent is placed on good F, while imported goods A and B face ad valorem tariffs of 20 percent and 30 percent, respectively. Calculate the ERP for the domestic industry producing good F, and interpret the meaning of this calculated ERP.

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Macroeconomics, Economics

Category:- Macroeconomics
Reference No.:- M92756278

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