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Domestic producers often base their claim for import protection in the fact that workers in country X are paid substandard wages. Is this a valid argument for protection? Can you give examples of when it did/did not work? Is there any trade restriction that the US government could impose that would have a negative/positive impact on your organization? Explain. 300 words

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Yes, this is quite a valid argument for protection as differences in cost of production is primarily due to low cost labor in nations such as India and China. The American companies pay higher labor cost and thus, unable to match the cost structure of these low cost nations. The wage levels vary from one country to another and the companies in low cost nations take advantage of low cost in their countries to produce goods at ...

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Domestic producers often base their claim for import protection in the fact that workers in country X are paid substandard wages.

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Effective rates of protection

1. Suppose the free trade market price of a car is $10,000. It contains $5000 worth of steel. The importing country imposes 25% tariff on car imports.

a. Calculate the effective rate of protection if there is no duty on steel imports.

b. Calculate the effective rate of protection if the importing country imposes a 20% tariff on steel imports.

c. Suppose it also takes $2000 worth of copper (besides $5000 worth of steel) to produce a car. Calculate the effective rate of protection if there is no import tariff on the imports of either steel or copper.

d. Suppose there is import duty of 20% and 15% on imports of steel and copper, respectively. Calculate the effective tariff rate.

2. Ignoring the mathematics, explain the operation of the Krugman model in economic terms and indicate its principal lessons.

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