Refer to the information provided in Figure 4.5 below to answer the questions that follow. Figure 4.5
-Refer to Figure 4.5. Assume that initially there is free trade. If the United States then imposes a $10.00 tax 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

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. Assume that initially there is free trade. If the United States then imposes a $10.00 tax 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

Quizplus · Accepted Answer

When the United States imposes a $10.00 tax per CD-Rom drive on imported CD-Rom drives, the cost of each CD-Rom drive for consumers and suppliers will increase. This will result in a decrease in the quantity of CD-Rom drives demanded by consumers, leading to a reduction of 3 million in demand. At the same time, the cost of producing CD-Rom drives domestically will decrease, leading to a 3 million increase in the quantity of CD-Rom drives supplied by U.S. firms. Furthermore, as the cost of CD-Rom drives increase, the price of CD-Rom drives in the United States will increase to $25. Therefore, all of the above choices are correct.

Refer to the Information Provided in Figure 4