Asked by Manuel De Sousa on May 27, 2024
Verified
If the supply of a product is upsloping and demand is downsloping, an excise tax of $2 per unit will increase price by
A) more than $2.
B) $2.
C) less than $2 and increase equilibrium output.
D) less than $2 and reduce equilibrium output.
Excise Tax
A specific tax levied on certain goods, services, or activities, often included in the price of things like gasoline, alcohol, and tobacco.
Equilibrium Output
The level of output at which the quantity of goods produced equals the quantity of goods demanded, with no excess supply or demand in the market.
- Grasp the impact of elasticity on the incidence of excise taxes.
Verified Answer
BC
Brynn ChaseJun 01, 2024
Final Answer :
D
Explanation :
An excise tax increases the cost of producing or selling a product, shifting the supply curve to the left. This typically results in a higher equilibrium price and lower equilibrium quantity, meaning the price increase is less than the tax amount and output is reduced.
Learning Objectives
- Grasp the impact of elasticity on the incidence of excise taxes.
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