If an excise tax is imposed on shirts,
A) the number of shirts produced will exceed the number demanded
B) the number of shirts demanded will exceed the number supplied
C) the equilibrium market price will decrease
D) the amount consumers pay for each shirt will decrease
E) the net revenue producers receive from each shirt will decrease

Question

Quizplus · Accepted Answer

An excise tax is a tax on producers and is typically passed on to consumers in the form of a higher price. As a result, the price of shirts will increase and the net revenue that producers receive from each shirt will decrease. This may lead some producers to reduce the quantity supplied, but it is unlikely to cause the quantity supplied to exceed the quantity demanded. The equilibrium market price may increase or decrease depending on the elasticity of demand and supply. The amount consumers pay for each shirt will also increase due to the tax.

If an Excise Tax Is Imposed on Shirts