In what way is the result of an excise tax imposed on either demanders or suppliers similar to the result of a price ceiling?
A) The amount that consumers pay for the good will be less than they previously paid
B) The amount of the good that will be traded in the market will be less than previously traded
C) both price ceilings and excise taxes create excess demand
D) The amount that consumers pay for the good will be greater than they previously paid
E) both price floors and excise taxes create excess supply

Question

Quizplus · Accepted Answer

Both an excise tax and a price ceiling restrict the quantity of the good traded in the market. An excise tax increases the cost of production for suppliers and a price ceiling restricts the price that suppliers can charge. As a result, both lead to a reduction in the quantity traded in the market. Therefore, the correct choice is B.

In What Way Is the Result of an Excise Tax