If the Government Institutes a Specific Tax for a Good

question 130

Multiple Choice

If the government institutes a specific tax for a good that has a perfectly elastic demand curve

• A)the producer passes the entire tax on to the consumer.
• B)the producer must absorb the entire tax.
• C)the producer can generally only pass part of the tax onto the consumer.
• D)the equilibrium price drops.

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Definitions:

Litres of Gasoline

A unit of measure used to quantify volumes of gasoline, commonly used in fuel transactions.

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The speed at which goods or services are being used up or consumed.

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A unit of length in the metric system equal to 1,000 meters, commonly used to measure distances.

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