If an Excise Tax Is Placed on a Product That

question 133

Multiple Choice

If an excise tax is placed on a product that has a perfectly inelastic demand, then:

• A) the entire tax will be paid by the consumer.
• B) the entire tax will be paid by the producer.
• C) the consumer and producer will each pay a share of the tax.
• D) the incidence of the tax cannot be determined unless we know the coefficient of price elasticity of supply.

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