In the long run,the imposition of an excise tax in a constant-cost competitive industry will cause price to:
A)rise by the amount of the tax.
B)fall by the amount of the tax.
C)rise by less than the amount of the tax.
D)fall by more than the amount of the tax.

Question

Quizplus · Accepted Answer

In a constant-cost competitive industry, the long-run supply curve is perfectly elastic. Therefore, the imposition of an excise tax will cause the price to rise by the full amount of the tax, as firms will pass the entire tax onto consumers.

In the Long Run,the Imposition of an Excise Tax in a Constant-Cost