Suppose that a $0.75 tax is placed on gasoline. Under what circumstances will gasoline sellers end up shouldering the full burden of the tax?

Question

Quizplus · Accepted Answer

If supply is upward-sloping and demand is perfectly elastic, then any increase in the price of gasoline (including the tax) will cause the quantity demanded to drop to zero. In this case, the sellers will have to bear the entire burden of the tax because they cannot pass any of the tax onto the consumers without losing all their sales.

Suppose That a $0