Final answer:
In an inflationary environment, an ad valorem tariff, which is based on a percentage of the value of goods, tends to raise more revenue than a specific tariff. A specific tariff, being a fixed amount per unit, doesn't adapt to price changes. When the government cuts the tariff on imported flat screen TVs, it is expected to lead to a lower market price and higher equilibrium quantity.
Step-by-step explanation:
In an inflationary environment, the impact of different types of tariffs on revenue collection can vary.
Option b, an ad valorem tariff, which is based on the percentage of the value of the goods, will tend to raise more revenue than a specific tariff. This is because, in an inflationary environment, as the prices of goods increase, the revenue generated from an ad valorem tariff, being a percentage of the price, will also increase accordingly.
On the other hand, a specific tariff is a fixed amount charged per unit of the good, and thus its revenue does not change with the price level. Therefore, during inflation, as the value of the currency diminishes, the amount raised by a specific tariff would not increase like the ad valorem tariff.
Now, let's consider the scenario of the U.S. government reducing the tariff on imported flat screen televisions:
Identify: The initial condition is a certain tariff level on flat screen TVs.
Analyze: A reduction in tariff is expected to decrease the price of imported flat screen TVs.
Apply: A decrease in the tariff will likely lead to a reduced market price for flat screen TVs.
Assess: With a lower price, the market equilibrium quantity is expected to increase, as consumers will likely purchase more TVs due to the lower price point.
Conclusively, while a specific tariff is straightforward to implement and collect, in an inflationary environment, it does not adapt to changes in price levels like an ad valorem tariff does.