The Effect of a Tax on Cigarettes on the Supply Curve

A $1.25 tax per pack of cigarettes placed on the sellers of cigarettes will shift the supply curve

a. to the right by exactly $1.25.
b. to the left by less than $1.25.
c. to the right by less than $1.25.
d. to the left by exactly $1.25.

Final answer:

The supply curve for cigarettes will shift to the left by exactly $1.25 when a tax of $1.25 per pack of cigarettes is placed on the sellers.

Explanation:

The correct answer is d. to the left by exactly $1.25.

When a tax is placed on the sellers of cigarettes, the supply curve shifts to the left by the amount of the tax. In this case, the tax is $1.25 per pack of cigarettes, so the supply curve will shift to the left by exactly $1.25.

This means that the sellers of cigarettes will now have to sell their cigarettes at a higher price to cover the cost of the tax, which will lead to a decrease in the quantity of cigarettes supplied.