Refer to the information provided in Figure 4.5 below to answer the questions that follow. Figure 4.5
-Refer to Figure 4.5. The United States will import 3 million CD-Rom drives if ________ tax per CD-Rom drive is levied on imported CD-Rom drives.
A) no
B) a $10
C) a $15
D) a $25

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. The United States will import 3 million CD-Rom drives if ________ tax per CD-Rom drive is levied on imported CD-Rom drives.
A) no 
B) a $10 
C) a $15 
D) a $25

Quizplus · Accepted Answer

From Figure 4.5, we can see that the price of the imported CD-Rom drives is $50. If a $10 tax per CD-Rom drive is levied on imported CD-Rom drives, the total cost of the imported CD-Rom drives would be $60 per unit. At this price, the quantity demanded by the United States is 3 million units, which is the same as the quantity supplied (Qd=Qs). Therefore, the United States will import 3 million CD-Rom drives if a $10 tax per CD-Rom drive is levied on imported CD-Rom drives. If the tax is higher than $10, the quantity demanded will be lower than 3 million units, resulting in a shortage. If the tax is lower than $10, the quantity demanded will be higher than 3 million units, resulting in a surplus.

Refer to the Information Provided in Figure 4