Who bears the burden of an excise tax if demand is perfectly inelastic? What if supply is perfectly inelastic? Use graphs in your explanation.
What will be an ideal response?
If demand is perfectly inelastic and an excise tax is placed on suppliers, the burden will shift fully to consumers. If supply is perfectly inelastic and an excise tax is placed on consumers, producers will bear the full tax burden. The two cases are illustrated in Figures 18-5 and 18-6.
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If the price elasticity of demand is greater than 1, a monopoly's
A) total revenue increases when the firm lowers its price. B) total revenue decreases when the firm lowers its price. C) marginal revenue is negative. D) marginal revenue is zero.
Which of the following would be the best choice for the government of Paulina if it decides to stimulate its economy by increasing consumption?
a. An excise tax on pharmaceuticals b. An excise tax on resort stays c. A subsidy for utility payments d. A subsidy for clothing
When the average cost per unit falls as the number of units produced? rises, it is known as which of the? following?
Which of the following statements is false?
A) A government with the power to tax can solve the free rider problem. B) A government with the power to tax can set a tax greater than the MEC when trying to change the market outcome into the efficient outcome. C) A government with the power to subsidize can set a subsidy greater than the MEB when trying to change the market outcome into the efficient outcome. D) Government can remove individuals from a prisoner's dilemma setting by changing the payoffs in the payoff matrix. E) none of the above