If the supply of a product is perfectly elastic and demand is downsloping,an excise tax of $2 per unit will increase price by:

A) more than $2.
B) less than $2.
C) $2 and increase equilibrium output.
D) $2 and reduce equilibrium output.

When supply is perfectly elastic, it can respond infinitely at the current price level, meaning suppliers will absorb the cost of the tax without changing the price. However, because demand is downsloping, the imposition of a tax will reduce the quantity demanded, leading to a reduction in equilibrium output. The price to consumers increases by the full amount of the tax ($2), reflecting the tax's impact on the market price.