A tax that is assessed on producers has no effect on a product's price if
A)demand is perfectly inelastic.
B)demand is perfectly elastic.
C)demand is unit elastic.
D)supply is unit elastic.
E)supply is perfectly elastic.

Question

Quizplus · Accepted Answer

If demand is perfectly elastic, any increase in price would cause consumers to completely switch to another substitute product. Therefore, producers cannot pass the tax onto consumers and instead, would simply absorb the cost themselves.

A Tax That Is Assessed on Producers Has No Effect