With a downsloping demand curve and an upsloping supply curve for a product, placing an excise tax on this product will

Question

Quizplus · Accepted Answer

When there is a downsloping demand curve and an upsloping supply curve, the imposition of an excise tax will lead to an increase in the price paid by consumers and a decrease in the price received by producers. This reduction in supply will lead to a decrease in equilibrium quantity. Therefore, the correct answer is D, which states that placing an excise tax on this product will increase equilibrium price and decrease equilibrium quantity.

With a Downsloping Demand Curve and an Upsloping Supply Curve