When a tax is levied on the sellers of a good,what happens to the supply curve
A)shifts left (up) by more than the tax
B)shifts right (down) by more than the tax
C)shifts left (up) by an amount equal to the tax
D)shifts right (down) by an amount equal to the tax

Question

Quizplus · Accepted Answer

When a tax is levied on the sellers of a good, their cost of production increases, and hence, they are willing to supply less. This results in a leftward (upward) shift of the supply curve. The amount of this shift depends on the size of the tax. If the tax is $x per unit, then the supply curve will shift to the left (up) by the same amount, i.e., the quantity supplied at every given price will be reduced by x. Therefore, the correct answer is (C) - the supply curve shifts left (up) by an amount equal to the tax.

When a Tax Is Levied on the Sellers of a Good,what