Question

How does an increase in an excise tax on cars affect the supply of cars?

a. More cars will be made.
b. Fewer cars will be made.
c. Supply will stay the same.
d. Supply will increase. Reset Selection

Answer 1

The correct answer is letter B. Fewer cars will be made. The increase in an excise tax on cars affect the supply of car by having "fewer cars will be made." Because of the increase of tax, it will also manifest an increase in amount of production and increase in selling price.