5. Calculating tax incidence Suppose that the U.S. government decides to charge wine consumers a tax. Before the tax, 30,000 bottles of wine were sold every week at a price of $6 per bottle. After the tax, 23,000 bottles of wine are sold every week; consumers pay $9 per bottle (including the tax), and producers receive $4 per bottle. The amount of the tax on a bottle of wine is $ per bottle. Of this amount, the burden that falls on consumers is $ per bottle, and the burden that falls on producers is $ per bottle. True or False: The effect of the tax on the quantity sold would have been smaller if the tax had been levied on producers. True False
5. Calculating tax incidence Suppose that the U.S. government decides to charge wine consumers a tax. Before the tax, 30,000 bottles of wine were sold every week at a price of $6 per bottle. After the tax, 23,000 bottles of wine are sold every week; consumers pay $9 per bottle (including the tax), and producers receive $4 per bottle. The amount of the tax on a bottle of wine is $ per bottle. Of this amount, the burden that falls on consumers is $ per bottle, and the burden that falls on producers is $ per bottle. True or False: The effect of the tax on the quantity sold would have been smaller if the tax had been levied on producers. True False
Chapter1: Making Economics Decisions
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Transcribed Image Text:5. Calculating tax incidence
Suppose that the U.S. government decides to charge wine consumers a tax. Before the tax, 30,000 bottles of wine were sold every week at a price of
$6 per bottle. After the tax, 23,000 bottles of wine are sold every week; consumers pay $9 per bottle (including the tax), and producers receive $4
per bottle.
The amount of the tax on a bottle of wine is $
per bottle. Of this amount, the burden that falls on consumers is $
per bottle, and the
burden that falls on producers is $
per bottle.
True or False: The effect of the tax on the quantity sold would have been smaller if the tax had been levied on producers.
True
False
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