-Refer to the accompanying graph. If a tax is placed on a good and all else is held constant, we would assume that the supply curve would:

Question

Quizplus · Accepted Answer

When a tax is placed on a good, the supply curve shifts upwards by the amount of the tax. This is because the suppliers now have to receive a higher price in order to cover their costs and still make a profit. In this graph, the initial supply curve is S₁. If a tax is placed on the good, the supply curve will shift upwards to S₂, as shown by the red arrow. Therefore, choice C is the best answer.

-Refer to the Accompanying Graph