Question

A province has a few gold mines that face perfectly elastic demand for their output at...

A province has a few gold mines that face perfectly elastic demand for their output at the World Price for gold. If the province applied a royalty (tax) on their output of $500 per ounce, their supply curve would shift. Draw a supply/demand model with perfectly elastic demand at the World Price and show the change (shift) in the mining industry’s supply curve. In the supply/demand model/diagram, show the net price that the gold mining industry will now receive (World Price less tax). In markets with perfectly elastic demand, where will the burden of excise taxes fall on — consumers or producers?

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