A tax imposed on the sellers of a good
A) raises both the price buyers pay and the net price received by sellers.
B) raises the price buyers pay and lowers the net price received by sellers.
C) lowers the price buyers pay and raises the net price received by sellers.
D) lowers both the price buyers pay and the price received by sellers.

Question

Quizplus · Accepted Answer

A tax imposed on sellers of a good increases the cost of production, which shifts the supply curve upward. As a result, the equilibrium price will increase, and the quantity sold will decrease. Because the tax is levied on sellers, they will receive a lower price than before, and the tax will decrease their net revenue. Buyers will pay a higher price, reflecting both the tax and the higher cost of production.

A Tax Imposed on the Sellers of a Good