Suppose Supply Is Perfectly Inelastic, While Demand Is Relatively Elastic

question 125

Multiple Choice

Suppose supply is perfectly inelastic, while demand is relatively elastic.A tax of $1.00 is levied on the purchasers of the good.Which of the following statements is correct?

• A)the government will fail to raise any tax revenue
• B)there will be a positive deadweight loss
• C)there will be no deadweight loss
• D)government revenue will be less than the deadweight loss of the tax.

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