A new sales tax has the effect of shifting the supply curve upward. This will generally move the equilibrium point
A) down and to the left.
B) up and to the right.
C) down and to the right.
D) up and to the left.
E) it has no effect on the equilibrium point.

Question

Quizplus · Accepted Answer

A new sales tax increases the cost of production, shifting the supply curve upward (or leftward). This results in a higher equilibrium price and a lower equilibrium quantity, moving the equilibrium point up and to the left.

A New Sales Tax Has the Effect of Shifting the Supply