Economics · International Trade
Which of the following correctly states the formula to compute the rate of effective protection? Where g = the rate of effective protection to producers of final commodities, t = the nominal tariff rate on consumers of the final commodity, ti = the nominal tariff rate on the imported input, and ai = the ratio of the cost of the imported input to the price of the final commodity in the absence of tariffs.
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1g = t + aiti1 + ai
- 2g = t - aiti1 + ai
- 3g = t + aiti1 - ai
- 4g = t - aiti1 - ai✓
Correct answer
g = t - aiti1 - ai
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