If the government imposes an excise tax on cars equal to $5,000 per automobile, the supply of automobiles will shift to the:
A) left and the price of automobiles will increase by $5,000.
B) left and the price of automobiles will increase by an unknown amount.
C) right and the price of automobiles will decrease by $5,000.
D) right and the price of automobiles will decrease by an unknown amount.

Question

Quizplus · Accepted Answer

An excise tax increases the cost of production, causing the supply curve to shift left. The price increase is determined by the elasticity of demand and supply, so the exact amount is unknown.

If the Government Imposes an Excise Tax on Cars Equal