42 Supply and Demand Analysis: an Oil Import Fee

Multiple Choice

4.2 Supply and Demand Analysis: An Oil Import Fee
Refer to the information provided in Figure 4.4 below to answer the questions that follow. Figure 4.4
-Refer to Figure 4.4. Assume that initially there is free trade. If the United States allowed drilling for more oil in the Gulf of Mexico, it could

A) reduce U.S. oil imports without a tax.
B) decrease the demand for domestic oil.
C) reduce the supply of domestic oil.
D) increase the domestic price of oil.