Tax Incidence with Perfectly Inelastic Supply

Steps:

• Elasticity of supply zero means supply is perfectly inelastic; quantity supplied remains fixed regardless of price changes.
• A specific tax on suppliers shifts the supply curve upward by the tax amount.
• With vertical supply curve, the new equilibrium has same quantity but no price increase for consumers.
• Suppliers receive price minus full tax, bearing entire burden.

Why B is correct:

• Tax incidence theorem states that with perfectly inelastic supply, suppliers bear 100% of the tax as they cannot adjust quantity to pass it on.

Why the others are wrong:

• A: Burden falls entirely on suppliers, not consumers, due to fixed supply.
• C: Burden is entirely, not mainly, on suppliers with zero elasticity.
• D: Burden falls entirely on suppliers, not mainly on consumers.

Final answer: B