A Tax of $1 on Each Unit a Producer Sells

question 166

Multiple Choice

A tax of $1 on each unit a producer sells will

• A) shift supply to the right.
• B) increase quantity demanded.
• C) shift supply to the left.
• D) increase quantity supplied.
• E) decrease demand.

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Definitions:

Yachts

Luxurious, privately owned boats that are used for leisure or sports.

Relatively Inelastic

Describes a situation where the demand for a good or service only slightly changes in response to price changes.

Relatively Elastic

A description of a situation where the demand for a good or service significantly changes in response to a change in price.

Excise Tax

A tax on the sale or production for sale of specific goods within a country, typically on commodities like alcohol and tobacco.