What will be the price of laptop computers if a 20% tariff is imposed on imports of finished laptop computers? _____________

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Explain duopolist’s dilemma.

May 5, 2018

. Laptop computers are produced domestically and also imported. The price of laptop computers is $1000 and domestic producers use $600 of imported inputs per laptop computer produced at home.

a) What will be the price of laptop computers if a 20% tariff is imposed on imports of finished laptop computers? _____________

b) What will be the domestic value added after tariff? ________________

c) What will be the effective rate of protection? _______________________

d) What will be the cost of input if along with a 20% tariff on finished computers, a 20% tariff is also imposed on imported inputs? ___________________________

e) What will be the value added when along with a 20% tariff on the finished computer, a 20% tariff is also imposed on imported inputs? __________

f) Based on information in part d) and e), what will be the new effective rate of protection on laptop computers? ___________

 

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