Suppose That Government Imposes a Specific Excise Tax on Product

question 320

Multiple Choice

Suppose that government imposes a specific excise tax on product X of $6 per unit and that the price elasticity of supply of X is unitary (coefficient = 1) . If the incidence of the tax is such that the producers of X pay $1.25 of the tax and the consumers pay $4.75, we can conclude that the

• A)supply of X is inelastic.
• B)demand for X is unitary elastic.
• C)demand for X is elastic.
• D)demand for X is inelastic.

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