Figure: Model of a Competitive Market (Figure: Model of a Competitive Market) Given the figure Model of a Competitive Market, if a tax is imposed on sellers, the equilibrium price will ________ and the equilibrium quantity will _.
A)increase; decrease
B)remain the same; increase
C)remain the same; decrease
D)increase; increase

Question

Figure: Model of a Competitive Market   (Figure: Model of a Competitive Market) Given the figure Model of a Competitive Market, if a tax is imposed on sellers, the equilibrium price will ________ and the equilibrium quantity will _.
A)increase; decrease 
B)remain the same; increase 
C)remain the same; decrease 
D)increase; increase

Quizplus · Accepted Answer

When a tax is imposed on sellers, the supply curve shifts upward by the amount of the tax. This causes a decrease in the quantity supplied and an increase in the price paid by buyers. Therefore, the equilibrium price will increase and the equilibrium quantity will decrease.