When a per unit tax is imposed on an industry where the supply curve is perfectly elastic:
A)consumers and producers share the tax.
B)consumers pay the full amount of the tax.
C)innovation is discouraged in that industry.
D)producers pay the full amount of the tax.

Question

Quizplus · Accepted Answer

When the supply curve is perfectly elastic, producers cannot pass on the burden of the tax to the consumers. As a result, consumers end up paying the full amount of the tax.

When a Per Unit Tax Is Imposed on an Industry