Multiple Choice
Two small California cities, Richmond and El Monte, are planning to impose a penny per ounce tax on sugary drinks. They are being opposed by the soda industry that is vehemently against this new legislation. (Source: Reuters, September 6, 2012)
-One reason why soda companies are so fervently against this tax might be because they assume sellers will pay the entire tax. Sellers will pay the entire tax if
A) supply is perfectly inelastic.
B) the price elasticity of supply is between zero and 1.
C) supply is unit elastic.
D) supply is perfectly elastic.
Correct Answer:
Verified
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