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AP® Microeconomics

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Tax Incidence: Perfectly Elastic Demand

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If demand is perfectly elastic, and supply is relatively inelastic, who would pay a per-unit excise tax?

A

Buyers would pay the full amount of the tax.

B

Sellers would pay the full amount of the tax.

C

Buyers and sellers would share the tax burden equally.

D

Both buyers and sellers would pay a portion of the tax, but buyers would pay more.

E

Both buyers and seller would pay a portion of the tax, but sellers would pay more.