Questions: If consumers pay 100% of a commodity tax, what could one conclude? Suppliers have more effective lobbying in Washington than consumers. The commodity in question has a perfectly elastic supply curve. The commodity in question has a perfectly elastic demand curve. Neither side has a perfectly elastic curve, but the supply side is more elastic than the demand side.

The answer is the third one: The commodity in question has a perfectly elastic demand curve.

Explanation for each option:

1. Suppliers have more effective lobbying in Washington than consumers.

   • This option is incorrect because lobbying effectiveness does not directly determine who bears the burden of a commodity tax. The tax incidence depends on the relative elasticities of supply and demand, not on political influence.

2. The commodity in question has a perfectly elastic supply curve.

   • This option is incorrect because if the supply curve were perfectly elastic, suppliers would bear the full burden of the tax, not consumers. A perfectly elastic supply means that suppliers are willing to supply any quantity at a given price, so any tax would be absorbed by them, not passed on to consumers.

3. The commodity in question has a perfectly elastic demand curve.

   • This option is correct. If the demand curve is perfectly elastic, consumers are very sensitive to price changes and will only buy at a specific price. Therefore, any tax imposed would lead to a price increase that consumers are unwilling to pay, meaning suppliers must absorb the tax. However, if consumers are paying 100% of the tax, it implies that the demand is perfectly elastic, and the price remains unchanged for consumers, with suppliers unable to pass any of the tax onto them.

4. Neither side has a perfectly elastic curve, but the supply side is more elastic than the demand side.

   • This option is incorrect because if the supply side is more elastic than the demand side, suppliers would bear less of the tax burden, and consumers would bear more. However, for consumers to pay 100% of the tax, the demand must be perfectly elastic, not just relatively less elastic than supply.

In summary, the correct conclusion is that the commodity in question has a perfectly elastic demand curve, leading consumers to bear the full burden of the commodity tax.