When a tax is imposed on a good,
A) the supply curve for the good always shifts.
B) the demand curve for the good always shifts.
C) the amount of the good that buyers are willing to buy at each price always remains unchanged.
D) the equilibrium quantity of the good always decreases.

Question

Quizplus · Accepted Answer

When a tax is imposed on a good, the supply curve for the good shifts to the left as the cost of production increases for the firm, causing a decrease in the quantity of the good supplied at any given price. This results in a higher price for the consumer, which reduces the quantity of the good demanded. As a result, the equilibrium quantity of the good decreases. Therefore, option D is the correct answer.

When a Tax Is Imposed on a Good