Exhibit 20-2 -Refer to Exhibit 20-2.The market for good X is initially in equilibrium at $5.The government then places a tax on the producers of good X-in effect,taxing them on each unit of good X they sell.As a result,the supply curve A) shifts (down and) rightward from S₂ to S₁. B) shifts (up and) leftward from S₁ to S₂. C) does not shift from S₁. D) There is not enough information to answer the question.

Question

Quizplus · Accepted Answer

A tax on producers would increase their costs of production and decrease the incentive to produce, leading to a leftward shift of the supply curve. This would result in a higher equilibrium price and lower equilibrium quantity. Therefore, the new equilibrium would be at a higher price than the initial equilibrium, and the supply curve would shift up and leftward from S₁ to S₂.

Exhibit 20-2 -Refer to Exhibit 20-2.The Market for Good X Is Initially