Question

A sales tax of $1 per unit of output is placed on one firm whose current equilibrium price is $5 and current equilibrium quantity is 100 units. If you know that the elasticity of demand is -1 and the elasticity of supply is (infinity), then after the tax:
a. pb=6, ps=5, and QT=unknown but less than 100
b. pb=4, ps=5, and QT=unknown but less than 100
c. pb=6, ps=5, and QT=100
d. pb=4, ps=5, and QT=100

Answer 1

Answer:

B

Explanation:

B is the correct answer