If the government imposes an excise tax on a good equal to $5 per unit and the demand curve for this good is vertical, the supply of this good will shift:
A)upward and the price will increase by.
B)upward and the price will increase by less than.
C)downward and the price will decrease by.
D)downward and the price will decrease by less than.

Question

Quizplus · Accepted Answer

An excise tax is a tax levied on the production or sale of a good or service. When the government imposes an excise tax on a good, the supply curve will shift upward. This is because the tax increases the cost of production for suppliers, and they will pass on at least part of this cost to consumers in the form of higher prices. The demand curve for this good is vertical, which means that the quantity demanded is not affected by the price. Therefore, the price will increase by the full amount of the tax.

If the Government Imposes an Excise Tax on a Good