Final answer:
The $1 per-tire recycling fee imposed by the City of Bloomington affects the quantity demanded but does not shift the demand curve itself; therefore, the demand curve remains unchanged.
Step-by-step explanation:
When the City of Bloomington imposes a $1 per-tire recycling fee on buyers, it affects the supply curve, not the demand curve. This is because the tax increases the production costs, which shifts the supply curve to the left, reflecting higher costs for producers which are then passed on to consumers. As a result, at any given price, the quantity demanded will decrease because the product becomes more expensive. However, the demand curve itself remains unchanged. Rather than moving the demand curve, the tax changes the quantity demanded along the same demand curve.
The correct answer to the student's question would therefore be: 3) The demand curve remains unchanged. This impact on resource allocation is illustrated in economic theory by showing that when a product increases in price, consumers buy less of it, leading to a potential reduction in sales and a decrease in production.