If an excise tax is imposed on automobiles,
A) the demand curve will shift upward and the market price will increase
B) the supply curve will shift downward and the market price will increase
C) the supply curve will shift upward and the market price will increase
D) the equilibrium quantity supplied will increase
E) the equilibrium quantity demanded will increase

Question

Quizplus · Accepted Answer

An excise tax on automobiles increases production costs, shifting the supply curve upward (or leftward), leading to a higher market price and lower equilibrium quantity.

If an Excise Tax Is Imposed on Automobiles