question archive If demand for Henritos potato chips is perfectly elastic, then a $10 tax on Henritos will a
If demand for Henritos potato chips is perfectly elastic, then a $10 tax on Henritos will a
Subject:EconomicsPrice:2.88 Bought3
If demand for Henritos potato chips is perfectly elastic, then a $10 tax on Henritos will
a. result in no change in the price paid by consumers.
b. lower the price paid by consumers by exactly $10.
c. result in no deadweight loss.
d. lower the deadweight loss.
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The answer is a. result in no change in the price paid by consumers.
Explanation:
- The Henritos potato chips is perfectly elastic
- There is a $10 tax
Two things will happen
1) The price will remain the same in perfectly elastic good
2) The supply curve will shift leftward, and the quantity demanded will reduce drastically, resulting in a deadweight loss to producers
