If the government levies an excise tax in a market whose supply curve is perfectly inelastic,the burden of the tax will fall completely on the _____,and the deadweight loss will equal _____.

Question

Quizplus · Accepted Answer

In a market with a perfectly inelastic supply curve, the quantity supplied does not change in response to a change in price. This means that producers are not able to pass on any of the tax to consumers and the entire burden of the tax falls on them. As a result, the deadweight loss will be zero because the market outcome does not change.

If the Government Levies an Excise Tax in a Market