Question    5 Suppose    the    federal    government    requires    beer    drinkers    to    pay    a    $2    tax    on    each    case    of    beer    purchased.     a) Draw    a    supply-and-demand    diagram    of    the    market    for    beer    without    the    tax.     Show    the    price    paid    by    consumers,    the    price    received    by    producers,    and    the     quantity    of    beer    sold.    What    is    the    difference    between    the    price    paid    by     consumers    and    the    price    received    by    producers? b) Now    draw    a    supply-and-demand    diagram    for    the    beer    market    with    the    tax.     Show    the    price    paid    by    consumers,    the    price    received    by    producers,    and    the     quantity    of    beer    sold.    What    is    the    difference    between    the    price    paid    by     consumers    and    the    price    received    by    producers?    Has    the    quantity    of    beer     sold    increased    or    decreased? c) Can    you    identify    any    government    revenues?

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Question    5
Suppose    the    federal    government    requires    beer    drinkers    to    pay    a    $2    tax    on    each    case    of    beer    purchased.    
a) Draw    a    supply-and-demand    diagram    of    the    market    for    beer    without    the    tax.    
Show    the    price    paid    by    consumers,    the    price    received    by    producers,    and    the    
quantity    of    beer    sold.    What    is    the    difference    between    the    price    paid    by    
consumers    and    the    price    received    by    producers?
b) Now    draw    a    supply-and-demand    diagram    for    the    beer    market    with    the    tax.    
Show    the    price    paid    by    consumers,    the    price    received    by    producers,    and    the    
quantity    of    beer    sold.    What    is    the    difference    between    the    price    paid    by    
consumers    and    the    price    received    by    producers?    Has    the    quantity    of    beer    
sold    increased    or    decreased?
c) Can    you    identify    any    government    revenues?
d) Is    there    any    inefficiency,    and    if    so,    can    you    define    it    and    label    it    on    the    graph?
e) If    the    producer    has    an    inelastic    supply    curve,    which    market    participant    has    
the    bigger    tax    burden?    Explain.

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