When demand is perfectly elastic, regulatory costs are never borne by:
A)consumers.
B)management.
C)stockholders.
D)government.

Question

Quizplus · Accepted Answer

When demand is perfectly elastic, any increase in price due to regulatory costs will cause consumers to switch to a substitute product with a lower price, resulting in a complete loss of market share for the affected product. Therefore, regulatory costs cannot be passed on to consumers in the form of higher prices. When demand is perfectly elastic, even a small increase in price would cause consumers to switch to a substitute product, resulting in a significant decrease in demand for the regulated product. Therefore, producers cannot pass on the regulatory costs to consumers, as the consumer would simply switch to a competing product that is cheaper. Thus, regulatory costs are never borne by consumers in a perfectly elastic demand scenario.

When Demand Is Perfectly Elastic, Regulatory Costs Are Never Borne