Suppose the demand for specialty car license plates is perfectly inelastic and the supply curve for specialty license plates is upward sloping.A tax is imposed on specialty license plates.Which of the following is true?
A) Drivers pay the smallest share of the tax.
B) Drivers pay none of the tax.
C) Drivers pay all of the tax.
D) The government pays all of the tax.
E) The government collects nothing in tax revenues.

Question

Quizplus · Accepted Answer

Since the demand for specialty car license plates is perfectly inelastic, drivers will continue to purchase the same quantity of license plates regardless of the tax imposed. Therefore, the entire burden of the tax will be passed onto the consumers (the drivers), making them pay all of the tax.

Suppose the Demand for Specialty Car License Plates Is Perfectly