Suppose the supply of land is perfectly inelastic and landowners are receiving payments equal to $100,000 an acre. If the government taxed the landowners' income with a tax rate of 20 percent, how much tax would the government collect?
A. less than $20,000 because the owners would change their behavior so as to pay less tax
B. $20,000 because the use of the land doesn't depend on the price the landowners receive for the land
C. more than $20,000 because the combined effects of all the owners trying to change their behavior actually would generate higher returns
D. zero, because the owner would do something else with the tax rather than pay such a high tax
Answer: B
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