If the Supply Curve Is Perfectly Inelastic and the Demand

question 46

Multiple Choice

If the supply curve is perfectly inelastic and the demand curve is a downward sloping straight line,what is the effect of a consumer ad valorem tax on equilibrium price and quantity?

• A) Price remains unchanged and quantity increases.
• B) Price decreases and quantity increases.
• C) Price decreases and quantity remains unchanged.
• D) Price and quantity decrease.

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Definitions:

Cash Collected

The total amount of money received by a company from its various activities, such as sales, services, or borrowings.

Customers

Individuals or entities that purchase goods or services from a company, contributing to the company's revenue.

Balance Sheet

A financial statement that reports a company's assets, liabilities, and shareholder equity at a specific point in time, providing a basis for computing rates of return and evaluating its capital structure.

Investing Activities

Financial actions associated with the purchase and sale of long-term assets and other investments not considered cash equivalents.