Suppose there is a tax of $50 on bicycles. The supply curve forbicycles slopes upward. The demand curve for bicycles slopesdownward. Sellers are required by law to pay the tax. If the taxis reduced from $50 to $10 per bicycle, then the:

Question

Quizplus · Accepted Answer

When the tax is reduced from $50 to $10, the cost of production for sellers is lowered by $40 per bicycle. This means that they can supply the same quantity of bicycles at a lower price. Therefore, the supply curve will shift downward by $40. The demand curve will remain unaffected by the change in tax.

Suppose There Is a Tax of $50 on Bicycles