Final answer:
A tariff is a tax on imported goods, which makes them more expensive to consumers and can protect domestic industries. When tariffs on products like flat-screen televisions are reduced, the equilibrium price usually goes down, and the equilibrium quantity sold goes up because of increased demand.
Step-by-step explanation:
A tariff is D. A tax on an imported good. It is a tool used by governments to generate revenue and to protect domestic industries from foreign competition. When a tariff is imposed on an imported good, it drives the price of that good up, making it less competitive compared to locally produced goods. This encourages consumers to buy domestic products. For instance, when large, flat-screen televisions are imported to the U.S. from China with a 5% tariff, the cost to consumers increases by that percentage, discouraging the purchase of imported TVs and potentially boosting the sales of those made domestically.
In the scenario where the U.S. government cuts the tariff on imported flat-screen televisions, we can analyze the impact using a four-step analysis:
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- Demand for imported flat screen TVs increases as the price decrease due to the tariff cut makes them more affordable.
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- Supply remains unchanged in the short term but may increase over time as foreign producers increase production to meet the new demand.
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- The equilibrium price of flat-screen TVs would likely decrease as the reduced tariff makes imported TVs cheaper.
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- The equilibrium quantity of flat-screen TVs sold would likely increase because lower prices usually lead to higher demand.
Overall, a reduction in tariffs typically results in a decrease in prices for consumers and an increase in the quantity sold.