Refer to the information provided in Figure 4.5 below to answer the questions that follow. Figure 4.5
-Refer to Figure 4.5. If the United States eliminates all taxes on CD-Rom drives, which of the following would occur?
A) The price of CD-Rom drives in the United States would be $15 per CD-Rom drive, and the United States would import 3 million CD-Rom drives.
B) The price of CD-Rom drives in the United States would be $25 per CD-Rom drive, and the United States would import 3 million CD-Rom drives.
C) The price of CD-Rom drives in the United States would be $15 per CD-Rom drive, and the United States would import 9 million CD-Rom drives.
D) The price of CD-Rom drives in the United States after the U.S. government eliminated all taxes on imported CD-Rom drives cannot be determined from this information.

Question

Refer to the information provided in Figure 4.5 below to answer the questions that follow.  Figure 4.5
-Refer to Figure 4.5. If the United States eliminates all taxes on CD-Rom drives, which of the following would occur?
A) The price of CD-Rom drives in the United States would be $15 per CD-Rom drive, and the United States would import 3 million CD-Rom drives. 
B) The price of CD-Rom drives in the United States would be $25 per CD-Rom drive, and the United States would import 3 million CD-Rom drives. 
C) The price of CD-Rom drives in the United States would be $15 per CD-Rom drive, and the United States would import 9 million CD-Rom drives. 
D) The price of CD-Rom drives in the United States after the U.S. government eliminated all taxes on imported CD-Rom drives cannot be determined from this information.

Quizplus · Accepted Answer

From the diagram, we can see that at a tax rate of $10 per CD-Rom drive, the price of CD-Rom drives in the United States is $25 per CD-Rom drive, and the United States imports 6 million CD-Rom drives. If the United States eliminates all taxes on CD-Rom drives, the price of CD-Rom drives in the United States would be $15 per CD-Rom drive (as the tariff was $10). At this price, the United States would demand 12 million CD-Rom drives (as seen on the demand curve) and the United States would import 9 million CD-Rom drives (the difference between domestic demand and domestic supply at the new price). Therefore, the answer is C.

Refer to the Information Provided in Figure 4