If the supply curve is perfectly inelastic and an excise tax is imposed
A)all of the tax is paid by buyers
B)all of the tax is paid by sellers
C)the market price will rise by the amount of the tax
D)the market price will fall by the amount of the tax
E)the tax is divided equally between buyers and sellers

Question

Quizplus · Accepted Answer

If the supply curve is perfectly inelastic, it means that producers cannot adjust their output in response to changes in market conditions, including changes in taxes. Therefore, the tax burden falls entirely on the sellers, who are unable to pass on any portion of the tax to buyers in the form of higher prices. As a result, the market price remains unchanged, and the quantity supplied remains the same.

If the Supply Curve Is Perfectly Inelastic and an Excise