Final answer:
A tax of 20 cents per unit of imported cheese exemplifies a specific tariff. A reduction in tariffs, such as on imported flat screen televisions, leads to an increased supply, decreasing the equilibrium price and increasing the quantity sold.
Step-by-step explanation:
A tax of 20 cents per unit of imported cheese would be an example of a specific tariff. A specific tariff is a fixed fee levied on a physical unit of an imported good. This differs from an ad valorem tariff, which is a percentage of the value of the imported good, and a quota, which is a limit on the amount of goods that can be imported. Subsidies are payments by the government to producers or consumers, which usually aim to reduce the cost of goods, encourage production, or support certain industries.
When the U.S. government reduces the tariff on imported goods, such as flat screen televisions, we expect the equilibrium price and quantity to be affected in the following way:
- Step 1: The reduction in the tariff decreases the cost of importing flat screen TVs.
- Step 2: A decrease in import costs leads to an increase in supply, as the goods become cheaper for importers to bring into the country.
- Step 3: With an increased supply, the market supply curve for flat screen TVs shifts to the right.
- Step 4: The rightward shift in supply leads to a lower equilibrium price for flat screen TVs and an increase in the equilibrium quantity sold, assuming demand remains constant.