Question

What typically happens to the supply curve for a commodity when an excise tax is imposed?

A) The supply curve shifts downward
B) The supply curve shifts upward
C) The supply curve remains unchanged
D) The supply curve becomes steeper

Answer 1

The supply curve for a commodity typically shifts upward when an excise tax is imposed. Therefore, the correct answer is B) The supply curve shifts upward.

Step-by-step explanation:

The supply curve for a commodity typically shifts upward when an excise tax is imposed. When a tax is introduced, it raises the costs of production for sellers, leading to a decrease in supply.

For example, let's consider a supply curve for gasoline. When an excise tax is imposed on gasoline, it increases the production costs for gasoline producers. As a result, they supply fewer units of gasoline at each price level, causing the supply curve to shift upward.

Therefore, the correct answer is B) The supply curve shifts upward.