e=(n-ab)/(1-a) Consider a cell phone that is produced by the American firm Compu

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e=(n-ab)/(1-a)

Consider a cell phone that is produced by the American firm Compu-Global. When producing the cell phone, Compu-Global produces components for the cell phone in Pakistan and assembles them domestically. Suppose that the good sells for $200 and that 60% of the cell phone's value comes from the value of the imported components. The United States imposes a 40% tariff on cell phones and a 15% tariff on the cell phone's components. Assume that foreign competitors face the same cost to produce components. Based on the information provided, the effective rate of protection that Compu-Global receives from the tariff is

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77.5%

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