If there was an increase in the excise tax imposed on guitar suppliers, what would be the effect on the equilibrium price and quantity of guitars?
A) Price increases; quantity decreases
B) Price decreases; quantity decreases
C) Price increases; quantity increases
D) Price decreases; quantity increases

Question

Quizplus · Accepted Answer

An increase in excise tax on guitar suppliers raises production costs, leading to a decrease in supply. This results in a higher equilibrium price and a lower equilibrium quantity.

If There Was an Increase in the Excise Tax Imposed