Final answer:
The 2.5% tax on imported wine is an example of an (D) ad valorem tariff, which is calculated as a percentage of the value of the goods. Tariffs like these aim to increase the cost of imports and can change the equilibrium price and quantity when altered.
Step-by-step explanation:
In the context of International Trade, tariffs are governmental taxes on imported goods and services, which are intended to make these goods more expensive in the domestic market. There are different types of tariffs, such as specific tariffs, compound tariffs, and ad valorem tariffs. The tax of 2.5% placed on imported wine, as described in the question, is an example of a D. ad valorem tariff. This is because the tax is calculated as a percentage of the value of the imported goods, rather than being a fixed amount per unit (specific tariff) or a combination of both a fixed amount per unit and a percentage of the value (compound tariff).
As an illustration of the effect of a tariff, consider the case of large, flat-screen televisions that were imported to the U.S. from China. They were subject to a 5% tariff rate, increasing their cost to consumers and reducing imports. When such tariffs are altered, it can shift the equilibrium price and quantity of the affected goods. For instance, if the U.S. government were to cut the tariff on imported flat screen televisions, the market could expect a reduction in price and an increase in the quantity sold, assuming demand remains constant.