FIGURE 18-3
-Refer to Figure 18-3.Suppose that supply is perfectly elastic and the price of this good is initially P₁.If an excise tax raises the price from P₁ to P₂,the direct burden of the tax is

Question

FIGURE 18-3 -Refer to Figure 18-3.Suppose that supply is perfectly elastic and the price of this good is initially P<sub>1</sub>.If an excise tax raises the price from P<sub>1</sub> to P<sub>2</sub>,the direct burden of the tax is A) the area DEFB. B) the area P<sub>1</sub>FBP<sub>2</sub>. C) the area P<sub>1</sub>CBP<sub>4</sub>. D) the area BFC. E) zero.

Quizplus · Accepted Answer

When supply is perfectly elastic, the entire burden of the excise tax falls on consumers, represented by the area P₁FBP₂.

FIGURE 18-3 -Refer to Figure 18-3.Suppose That Supply Is Perfectly Elastic and Elastic