Question: Good X is exchanged in a competitive market. Which of the following is true if an excise tax is now imposed on the production of
Good X is exchanged in a competitive market. Which of the following is true if an excise tax is now imposed on the production of good X?
(A) If the demand curve is perfectly elastic, the price rises by the amount of the tax.
(B) The consumer’s burden of the tax rises as the demand curve is more elastic.
(C) Consumer surplus rises as a result of the tax.
(D) The consumer’s burden of the tax rises as the demand curve is less elastic.
(E) If the demand curve is perfectly inelastic, the price does not rise as a result of the tax.
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