The supply of milk in Nexus City is perfectly elastic.If a tax is imposed on each gallon of milk sold,________.

Question

Quizplus · Accepted Answer

Since the supply of milk is perfectly elastic, the sellers can easily adjust their quantity supplied in response to the tax, shifting the entire burden of the tax onto the buyers. Therefore, the burden of the tax will fall entirely on the buyers. As for the deadweight loss, it cannot be determined solely based on the elasticity of supply, as it also depends on the elasticity of demand and the magnitude of the tax.

The Supply of Milk in Nexus City Is Perfectly Elastic