If the demand curve for a good is horizontal, a tax is levied on this product is Select one: a

Ans. The correct answer is

D. Paid entirely by sellers : When the demand curve is horizontal or we can say is perfectly elastic , the tax on that particular product is entirely paid by the sellers . Thus this option is correct.

Other options are

A. Split between the buyers and the sellers but not evenly so that either the buy or seller pays more : The option is incorrect because when the demand curve is horizontal, the tax is levied entirely on sellers but the option says that the tax is split between the buyers and sellers and one of them pays more than the other.

B. Not paid by either the buyers or the seller : The option is incorrect because it is sold by the sellers and the option says that nobody pays the tax.

C. Paid entirely by buyers : The option is incorrect because when demand curve is horizontal , the tax is paid entirely by sellers and not the buyers.

E. Split evenly between the buyers and the sellers : The option is incorrect because in case of horizontal demand curve, tax is paid by the sellers only but here it is being split between both of them .