Suppose that the production of $1 million worth of steel in Canada requires $100,000 worth of...

Question

Suppose that the production of $1 million worth of steel in Canada requires $100,000 worth of taconite. Canada's nominal tariff rates of importing these goods are 20% for steel and 10% for taconite. Given this information, calculate the effective rate of protection for Canada's steel industry.

David · Accepted Answer

Tariff rate imposed on steel = 20% 
Tariff rate for taconite = 10% 
However, taconite forms 10% of the steel cost as for producing $ 1 million worth of steel, $ 
0.1 million taconite is required.  
Thus,

Suppose that the production of $1 million worth of steel in Canada requires $100,000 worth of taconite. Canada's nominal tariff rates of importing these goods are 20% for steel and 10% for taconite....

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