Suppose the government imposes a $10 per month tax on cell phone service.If the demand curve for cell phone service is perfectly inelastic and the supply curve is upward-sloping,the monthly price for cell phone service will increase by:

Question

Quizplus · Accepted Answer

Since the demand curve is perfectly inelastic, the quantity demanded will not change regardless of the price. Therefore, the entire $10 tax will be passed on to the consumers, resulting in a $10 increase in the monthly price for cell phone service.

Suppose the Government Imposes a $10 Per Month Tax on Cell