Refer to the information provided in Figure 5.7 below to answer the question(s) that follow. Figure 5.7
The above figure represents the market for pumpkins both before and after the imposition of an excise tax, which is represented by the shift of the supply curve.
-Refer to Figure 5.7. Had the demand for pumpkins been perfectly inelastic at Point A, the amount store owners would have received per pumpkin after the imposition and payment of this tax would have been
A) $3.00.
B) $5.50.
C) $7.25.
D) $8.50.

Question

Refer to the information provided in Figure 5.7 below to answer the question(s) that follow.  Figure 5.7
The above figure represents the market for pumpkins both before and after the imposition of an excise tax, which is represented by the shift of the supply curve.
-Refer to Figure 5.7. Had the demand for pumpkins been perfectly inelastic at Point A, the amount store owners would have received per pumpkin after the imposition and payment of this tax would have been
A) $3.00. 
B) $5.50. 
C) $7.25. 
D) $8.50.

Quizplus · Accepted Answer

If the demand for pumpkins were perfectly inelastic at Point A, consumers would bear the entire burden of the tax. This means they would pay the original price plus the full amount of the tax. If the original price at Point A was $5.50 (as implied by the question's context, assuming Point A's price before tax), and since the demand is perfectly inelastic, consumers would continue to pay the same total amount, which includes the tax, without any decrease in quantity demanded. Thus, store owners receive the same amount per pumpkin, $5.50, as the tax does not affect the price received by sellers in the case of perfectly inelastic demand.

Refer to the Information Provided in Figure 5