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On June 23, 2011, Honduras Announced New Taxes on Various

Question 64

Multiple Choice

On June 23, 2011, Honduras announced new taxes on various industries including the telephone industry. If local consumers have access to the Internet independent of telephones, and the local phone industry's main consumer base is in Honduras, who will bear most of burden of this tax and why?


A) Consumers will bear most of the burden; their demand curve for phones is more elastic because of the few substitutes at their disposal.
B) Consumers will bear most of the burden; their demand curve for phones is more inelastic because of having access to the Internet.
C) Producers will bear most of the burden; their supply curve for phones is more inelastic because of the difficulty in moving their operations to another country.
D) Producers will bear most of the buden; their supply curve for phones is more elastic because they can import phones from all over the world.

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