Suppose the government imposes a $16 per month tax on internet service. If the demand curve for internet service is perfectly elastic, and the supply curve is upward-sloping, the monthly price for internet service will:
A)increase by $8.00.
B)increase by more than $16.
C)increase by $16.
D)not change.

Question

Quizplus · Accepted Answer

When demand is perfectly elastic, consumers are very sensitive to price changes, and any increase in price would lead to zero quantity demanded. Therefore, the entire tax burden falls on the suppliers, and the price paid by consumers does not change.

Suppose the Government Imposes a $16 Per Month Tax on Internet