If the government imposes an excise tax on gasoline equal to $0.25 per gallon and the demand curve for gasoline is downward-sloping, the supply of gasoline will:
A) shift upward and the price will increase by $0.25 per gallon.
B) shift upward and the price will increase by less than $0.25 per gallon.
C) shift downward and the price will decrease by $0.25 per gallon.
D) shift downward and the price will decrease by less than $0.25 per gallon.

Question

Quizplus · Accepted Answer

The supply curve will shift upward by the amount of the tax, but the price increase will be less than $0.25 per gallon because the tax burden is shared between consumers and producers depending on the elasticity of demand and supply.

If the Government Imposes an Excise Tax on Gasoline Equal