What happens when the government imposes a unit excise tax on a good?

Question

Quizplus · Accepted Answer

When the government imposes a unit excise tax on a good, the supply curve of that good shifts vertically upwards by the amount of the per-unit tax being levied. This means that at every quantity, the cost of production for the supplier has increased by the amount of the tax, leading to a decrease in supply. This ultimately leads to an increase in the equilibrium price of the good and a decrease in the quantity demanded. Thus, option D is the correct answer.

What Happens When the Government Imposes a Unit Excise Tax