A shoe factory in western Maine manufactures sneakers from two products: cloth and rubber.
A shoe factory in western Maine manufactures sneakers from two products: cloth and rubber. Cloth accounts for 40% of the value of a finished sneaker, while rubber accounts for 60% of the finished value. The firm currently imports rubber from Ghana and obtains the cloth from a textile mill in North Carolina. The United States government imposes a 5% ad valorem import tariff on rubber and a 10% ad valorem import tariff on cloth. The United States also imposes a 15% tariff on imported sneakers.a) What is the effective rate of protection for sneakers?
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