To finance medical care, the federal government raises the tax per pack paid by sellers of cigarettes. Other things being equal, the price of cigarettes rises because of a(n):

Question

Quizplus · Accepted Answer

By raising the tax per pack paid by sellers, the government increases the cost for producers to supply cigarettes to the market, which decreases the quantity supplied at every price level. This results in a leftward shift of the supply curve for cigarettes, causing an increase in the equilibrium price and a decrease in the equilibrium quantity. Therefore, the price of cigarettes rises due to a leftward shift of the supply curve for cigarettes.

To Finance Medical Care, the Federal Government Raises the Tax