FIGURE 18-3
-Refer to Figure 18-3. Suppose that supply is perfectly elastic and the price of this good is initially P1. If an excise tax raises the price from P1 to P2, the excess burden of the tax is area

Question

Quizplus · Accepted Answer

When supply is perfectly elastic, the excess burden (or deadweight loss) of a tax is represented by the triangle formed between the initial and new equilibrium quantities. In this case, it is the area BFC.

FIGURE 18-3 -Refer to Figure 18-3. Suppose That Supply Is Perfectly Elastic