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The federal government imposes a tax on alcoholic beverages that producers must pay. From the seller's perspective, how does this tax affect the supply curve for alcoholic beverages?
AIt shifts the supply curve to the right
BIt shifts the demand curve to the left
CIt has no effect on either curve
DIt shifts the supply curve to the left
Answer & Solution
Correct answer: D. It shifts the supply curve to the left
1. Businesses treat a tax as an added cost of production.
2. Higher costs at every output level make producers less willing to supply as much at every price.
3. A curve showing a lower quantity supplied at every price has shifted to the left.
4. The tax is levied on producers, so it moves the supply curve, not the demand curve, ruling out option C.
_Source: OpenStax Principles of Macroeconomics for AP Courses (CC BY 4.0), Ch 3 "Demand and Supply", section 3.2 | Shifts in Demand and Supply for Goods and Services_
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