Question

When a tax is levied on the sellers of a good

a) the supply curve shifts upward by the amount of the tax.
b) quantity demanded decreases for all conceivable prices of the good.
c) quantity supplied increases for all conceivable prices of the good.
d) none of the above is correct

Answer 1

The correct answer is option d.

Step-by-step explanation:

When a tax is levied on the sellers of a good, it creates a tax wedge. The price received by the sellers decreases. The tax rate is increases the cost of production.

This causes the supply to decrease. The supply curve shifts leftward or upward by the amount of tax.

This upward shift in the supply curve causes the price level to increase and output level to decrease.