Economics (AS & A Level) · Oct / Nov 2023 · Paper 12 · Question 16
9708Methods and effects of government intervention in markets
The government imposes a specific indirect tax of $1 on each unit of a good sold. How does the imposition of the tax shift the demand or supply curve of the good?
- AThe demand curve of the good will shift vertically downwards by $1.
- BThe demand curve of the good will shift vertically upwards by $1.
- CThe supply curve of the good will shift vertically downwards by $1.
- DThe supply curve of the good will shift vertically upwards by $1.
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Correct answer: D. The supply curve of the good will shift vertically upwards by $1.
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