Question

If U.S. Congress imposed an import fee on crude oil, what would happen to the following...

If U.S. Congress imposed an import fee on crude oil, what would happen to the following and explain?

a) Would the world demand curve for crude oil: Shift to the right, shift to the left, or stay the same

b) World supply curve for crude oil: Shift to the right, shift to the left, or stay the same

c) U.S. demand curve for crude oil: Shift to the right, shift to the left, or stay the same

d) U.S. supply curve for crude oil: Shift to the right, shift to the left, or stay the same

e) World crude oil prices: rise, fall, change little

f) U.S. crude oil prices: rise, fall, change little

g) World oil consumption: rise, fall, change little

h) U.S. oil consumption; rise, fall, change little

i) U.S. oil imports; rise, fall, change little

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Answer #1

Import fee on crude oil will increase domestic price of crude oil, lowering its domestic quantity demanded and raising its domestic quantity produced, thus lowering imports. Therefore

(a) World demand for crude oil - Shift to left (Since US import demand will fall, world demand will fall)

(b) World supply for crude oil - Stay the same

(c) US demand for crude oil - Shift to left (Since US domestic quantity demanded will fall)

(d) US supply of crude oil - Shift to right (Since US domestic quantity supplied will rise)

(e) World crude price - Fall (since world demand for crude will fall)

(f) US crude oil price - Rise

(g) World oil consumption - Fall

(h) US oil consumption - Fall

(i) US oil imports - Fall

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