-The demand for apple pies is perfectly elastic.If the government taxes apple pies at $1 a pie,then ________.
A) the seller pays the entire tax
B) the buyer pays the entire tax
C) the seller and the buyer split the tax evenly
D) the seller and the buyer split the tax but the seller pays more
E) who pays the tax depends on whether the government imposes the tax on pie buyers or on pie sellers

Question

-The demand for apple pies is perfectly elastic.If the government taxes apple pies at $1 a pie,then ________.
A) the seller pays the entire tax 
B) the buyer pays the entire tax 
C) the seller and the buyer split the tax evenly 
D) the seller and the buyer split the tax but the seller pays more 
E) who pays the tax depends on whether the government imposes the tax on pie buyers or on pie sellers

Quizplus · Accepted Answer

In a perfectly elastic demand scenario, sellers cannot pass any of the tax onto buyers because buyers will only pay the original price. Therefore, the seller bears the entire tax burden.

-The Demand for Apple Pies Is Perfectly Elastic