Question

If Supply and Demand have the normal shapes (not perfectly elastic or inelastic), a "tax on sellers" (as defined by Mankiw) will shift supply upward by less than the amount of the tax, and equlibrium posted price will increase by the amount of the tax.

a) true
b) false

Answer 1

The answer b false

Step-by-step explanation:

The effect of the tax on the supply-demand equilibrium is to shift the quantity toward a point where the before-tax demand minus the before-tax supply is the amount of the tax. The price the buyer pays rises, but generally by less than the tax.