Suppose that the supply of insulin is perfectly elastic and the demand for insulin perfectly inelastic. Then the result of an excise tax would be
A)a significant increase in government revenue and a significant decrease in the quantity consumed.
B)a significant decrease in the quantity consumed with no change in government revenue.
C)a significant increase in government revenue and no change in the quantity consumed.
D)no increase in government revenue and no change in the quantity consumed.

Question

Quizplus · Accepted Answer

When the supply of a good is perfectly elastic and the demand is perfectly inelastic, the burden of the excise tax falls entirely on the consumer, resulting in no change in the quantity consumed. Therefore, the government would generate higher revenue without affecting the market equilibrium.

Suppose That the Supply of Insulin Is Perfectly Elastic and the Demand