The imposition of a per unit tax on a product
A) will cause the supply curve to shift downward and to the right.
B) will cause the supply curve to shift upward and to the left.
C) will reduce the quantity supplied of the product.
D) will encourage producers to increase the quantity supplied of the product.

Question

Quizplus · Accepted Answer

A per unit tax on a product increases the cost of producing or selling that product, which effectively decreases the supply or makes it more expensive for producers to supply the same quantity. This is represented graphically by the supply curve shifting upward (to represent the higher cost) and to the left (to represent the reduced quantity supplied at each price point).

The Imposition of a Per Unit Tax on a Product