Refer to Scenario 10.3. Suppose that a tax of $5 per unit of output is imposed on red herring producers. The price of red herring will:

A) not change.
B) increase by less than $5.
C) increase by $5.
D) increase by more than $5.
E) decrease.

The imposition of a tax on producers shifts the supply curve upwards by the amount of the tax. This does not translate into a one-to-one increase in price for consumers because the market will reach a new equilibrium at a lower quantity and a higher price, but the price increase is typically less than the tax amount due to the shared burden between producers and consumers.