1. Business
  2. Economics
  3. a at market price b at efficiency price...

Question: a at market price b at efficiency price...

Question details

6. 4 marks] Assuming that shoes have a world price of US$60 each, that the EU has a 45% ad valorem import duty on footwear which applies to all types of footwear and an Italian company is proposing a project to substitute 150,000 imported shoes by domestically produced shoes. The annual cost of the project (operating cost plus annual equivalent capital cost) at both market and efficiency prices is $9.4 millions. Apart from the tariff there are no other distortions to the EU domestic price of shoes. Calculate the net annual benefit of the project:

(a). at market price?

(b) at efficiency price?

Solution by an expert tutor
Blurred Solution
This question has been solved
Subscribe to see this solution