Suppose there is a tax of $50 on bicycles. The supply curve for bicycles slopes upward. The demand curve for bicycles slopes downward. Sellers are required by law to pay the tax. If the tax is reduced from $50 to $10 per bicycle, then the:
A) supply curve will shift downward by $40.
B) demand curve will shift downward by $40.
C) demand curve will shift upward by $40.
D) supply curve will shift upward by $40.

Question

Quizplus · Accepted Answer

When the tax on sellers is reduced, the supply curve shifts downward by the amount of the tax reduction, which is $40 in this case.

Suppose There Is a Tax of $50 on Bicycles