Asked by Rainn Cline on May 05, 2024
Verified
Refer to Figure 4.5. Assume that initially there is free trade. If the United States then imposes a $10.00 tariff per CD-Rom drive on imported CD-Rom drives,
A) the quantity of CD-Rom drives demanded will be reduced by 3 million.
B) the quantity of CD-Rom drives supplied by U.S. firms will increase by 3 million.
C) the price of CD-Rom drives in the United States will increase to $25.
D) all of the above
CD-Rom Drives
Hardware devices used for reading data stored on CD-ROMs, typically used for distributing software and storing media in the past.
Tariffs
Taxes on imports or exports between sovereign states, used to control trade, raise government revenue, or protect domestic industries.
United States
A country located in North America, consisting of 50 states and a federal district, known for its large economy and diverse population.
- Analyze how tariffs and trade policies affect local market dynamics, specifically regarding price modifications, the scale of imports, and the demand and supply of goods.
Verified Answer
ES
Ethakota SriramMay 08, 2024
Final Answer :
D
Explanation :
Imposing a tariff increases the price of imported goods, making domestic products more competitive. This leads to a decrease in demand for the more expensive imported goods, an increase in supply from domestic producers as they ramp up to meet the shifted demand, and an overall increase in the market price of the good in question, in this case, CD-Rom drives. Thus, all of the statements A, B, and C are correct outcomes of imposing a tariff.
Learning Objectives
- Analyze how tariffs and trade policies affect local market dynamics, specifically regarding price modifications, the scale of imports, and the demand and supply of goods.