Answer to Question #302968 in Microeconomics for Chi may

Question

United States simultaneously limits imports of ethanol for fuel purposes and provides incentives for the use of ethanol in gasoline, which raise the price of ethanol by about 25 per cent relative to what it would be otherwise. We do, however, have free trade in corn, which is fermented and distilled to make ethanol and accounts for approximately 55 per cent of its cost. What is the effective rate of protection on the process of turning corn into ethanol?

Answer 1

The effective rate of protection by the use of corn to produce ethanol is good because when it is combined with gasoline, it burns with less pollution to the environment and also it oxygenate thereby producing more energy.