Question

The government proposes a tax on imported champagne. Buyers will bear the entire burden of the tax if the:_________A) supply curve for imported champagne is vertical.B) demand curve for imported champagne is horizontal.C) demand curve is downward sloping and the supply curve is upward sloping.D) demand curve for imported champagne is vertical.

Answer 1

Answer: D) demand curve for imported champagne is vertical

Explanation:

If the government proposes a tax on the imported champagne, it should be noted that the buyers will bear the entire tax burden when the demand curve for the imported champagne is vertical.

This implies that the quantity of imported champagne that is demanded

will remains the same, even though there's an increase of price.