Final answer:
In the global marketplace, tariffs are taxes on imported goods and directly affect prices; thus, the statement is true. The reduction of tariffs on flat screen televisions would result in a decrease in their market price and an increase in the quantity sold.
Step-by-step explanation:
In the global marketplace, prices are indeed directly affected by special types of taxes called tariffs. So, the correct option is a. true. Tariffs are used by nations to generate revenue and protect domestic industries by making imported goods more expensive.
To analyze how a tariff reduction will affect the equilibrium price and quantity of imported flat screen televisions, we can follow a four-step analysis:
- Identify the original equilibrium - Find the current price and quantity where the supply and demand for flat screen televisions are equal.
- Identify the change - A reduction in tariffs on imported flat screen TVs decreases the cost for importers.
- Analyze the effect on supply and demand - The reduction in tariffs causes the supply curve to shift to the right, as importers can now offer more TVs at every price.
- Determine the new equilibrium - With a higher supply, the equilibrium price will decrease, and the equilibrium quantity will increase.
Overall, reducing tariffs on imported flat screen televisions would lead to a decrease in market price and an increase in the quantity sold, benefiting consumers by offering lower prices and more options.