Question 1:

A per unit tax levied on the purchases (or sales) in a particular market

1. will be borne by the consumer if the demand is perfectly elastic.

2. will be borne by the producer if the supply is perfectly elastic.

3. will be borne by the consumer if the supply is perfectly elastic.

4. will be borne equally by consumer and producer regardless of whether the tax is levied on the consumer or on the producer.

Choose the option that yields the correct answer.