4.2 Supply and Demand Analysis: An Oil Import Fee
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. The price of oil in the United States will increase to $150 per barrel if the United States then imposes ________ tax per barrel of imported oil.
A) no
B) a $25
C) a $50
D) a $100

Question

4.2 Supply and Demand Analysis: An Oil Import Fee
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. The price of oil in the United States will increase to $150 per barrel if the United States then imposes ________ tax per barrel of imported oil.
A) no 
B) a $25 
C) a $50 
D) a $100

Quizplus · Accepted Answer

Without seeing Figure 4.4, we can deduce that if the price of oil increases to $150 per barrel with the imposition of a tax, then the tax amount added to the original price (assumed to be lower than $150) must result in the new price. A $25 tax on imported oil could be the correct answer if the original free trade price was $125, making the new price $150 after the tax.

42 Supply and Demand Analysis: an Oil Import Fee