Refer to the information provided in Figure 4.4 below to answer the questions that follow. Figure 4.4
-Refer to Figure 4.4. Assume that initially there is free trade. If the United States then imposes a $25 tax per barrel of imported oil,
A) the quantity demanded of oil will be reduced by 4 million barrels per day.
B) the quantity of oil supplied by U.S. firms will increase by 8 million barrels per day.
C) U.S. imports of oil will increase by 4 million barrels per day.
D) the price of oil in the U.S. will increase to $150 per barrel.

Question

Refer to the information provided in Figure 4.4 below to answer the questions that follow.  Figure 4.4
-Refer to Figure 4.4. Assume that initially there is free trade. If the United States then imposes a $25 tax per barrel of imported oil,
A) the quantity demanded of oil will be reduced by 4 million barrels per day. 
B) the quantity of oil supplied by U.S. firms will increase by 8 million barrels per day. 
C) U.S. imports of oil will increase by 4 million barrels per day. 
D) the price of oil in the U.S. will increase to $150 per barrel.

Quizplus · Accepted Answer

When a tax is imposed on imported oil, the price of oil in the U.S. will increase. This will cause a reduction in the quantity demanded of oil, but an increase in the quantity supplied by U.S. firms. However, it is unlikely that the quantity of U.S. imports of oil will also increase. Therefore, the best choice is D.

Refer to the Information Provided in Figure 4