Consider Two Increasing Cost Competitive Industries (A and B)having Identical

question 65

Multiple Choice

Consider two increasing cost competitive industries (A and B) having identical demand curves.However,the supply curve faced by industry A is more inelastic than the supply curve of industry B.Which of the following is true if a per-unit excise tax is levied on the output of both the industries?

• A)The consumers of industry A's product will bear a greater burden of the tax than the producers.
• B)The consumers of industry A's product will bear a smaller burden of the tax than the producers.
• C)The consumers of industry B's product will bear a smaller burden of the tax than the consumers of industry A.
• D)The consumers of industry B's product will bear the entire burden of the tax imposed on that product.

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