Final answer:
A tariff of 15% on imported artwork represents an ad valorem tariff, which is based on the value of the goods. A reduction in tariffs, such as on flat screen TVs, can lead to a decrease in the equilibrium price and an increase in the equilibrium quantity of the goods in the domestic market.
Step-by-step explanation:
A tariff is a tax imposed on imported goods, and it serves various purposes such as raising government revenue and protecting domestic industries. A tariff of 15% on imported artwork is an example of an ad valorem tariff, which is a tax based on the value of the goods. This is in contrast to a specific tariff, which is a set fee based on a physical measure like weight or volume, or a compound tariff which combines both a specific and an ad valorem tariff.
When a tariff, such as on imported flat screen televisions, is reduced, we can analyze the effects using a four-step analysis:
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Thus, a reduction in tariffs on goods like flat screen televisions can have a significant impact on the market equilibrium, typically resulting in a lower equilibrium price and higher equilibrium quantity sold.