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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

1 Answer

4 votes

Answer:

B

Step-by-step explanation:

B is the correct answer

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