If the government imposes an excise tax on a good equal to $5 per unit and the demand curve for this good is vertical, the supply of this good will shift:
A) upward and the price will increase by $5.
B) upward and the price will increase by less than $5.
C) downward and the price will decrease by $5.
D) downward and the price will decrease by less than $5.

Question

Quizplus · Accepted Answer

When the demand curve is vertical, it means demand is perfectly inelastic. The entire tax burden falls on consumers, so the supply curve shifts upward by the amount of the tax, and the price increases by the full $5.

If the Government Imposes an Excise Tax on a Good