Calculate the Effective Rate of Protection for the Domestic MP3

Multiple Choice

Calculate the effective rate of protection for the domestic MP3 player industry following the imposition of a 20 percent tariff on the imports of MP3 players. The cost of material inputs used in production of MP3 players in the country is $100 per unit and there is free trade in these material inputs. The world price of MP3 players is $175 per unit. Assume that the country is a small country.

A) 20%
B) 46⅔%
C) 90%
D) 72⅔%