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    Excise tax - supply curve

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    The government levies an excise tax of 5 cents per unit sold on the sellers in a competitive industry. Both supply and demand curves have some elasticity with respect to price. This tax means that the:
    A) supply curve shifts to the left by 5 cents, but (unless demand is perfectly elastic) price will not rise.
    B) supply curve shifts to the left by less than 5 cents, but (unless demand is highly elastic) price will rise by the full five cents.
    C) supply curve shifts to the left by less than 5 cents, but (unless demand is highly inelastic) price will rise by more than 5 cents.
    D) supply curve shifts to the left by 5 cents, but (unless supply is perfectly elastic) any price rise will be less than 5 cents.
    E) demand curve shifts to the right by 5 cents, and price will rise by 5 cents.

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    https://brainmass.com/economics/supply-and-demand/excise-tax-supply-curve-19340

    Solution Preview

    The excise tax is like a 5 cents increase in the marginal cost of the supplier, which push the supply curve up(left) by 5 cents. Then for any ...

    Solution Summary

    The solution answers the question(s) below. The expert examines excise tax for supply curves.

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