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Suppose that the U.S. government decides to charge wine producers a tax. Before the tax, 25 billion bottles of wine were sold every year at a price of $5 per bottle. After the tax, 18 billion bottles of wine are sold every year; consumers pay $6 per bottle, and producers receive $3 per bottle (after paying the tax). 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.

Suppose that the U.S. government decides to charge wine producers a tax. Before the tax, 25 billion bottles of wine were sold every year at a price of $5 per bottle. After the tax, 18 billion bottles of wine are sold every year; consumers pay $6 per bottle, and producers receive $3 per bottle (after paying the tax). 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.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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**Scenario Analysis: Tax on Wine Producers** Suppose that the U.S. government decides to charge wine producers a tax. - **Before the tax:** - 25 billion bottles of wine were sold annually. - Price per bottle: $5. - **After the tax:** - 18 billion bottles of wine are sold annually. - Consumers pay $6 per bottle. - Producers receive $3 per bottle (after paying the tax). **Calculation:** 1. **Amount of the tax on a bottle of wine** - Tax per bottle: $___ 2. **Burden distribution:** - Burden on consumers: $___ per bottle. - Burden on producers: $___ per bottle. **Question:** Determine the accuracy of the following statement: *True or False: The effect of the tax on the quantity sold would have been smaller if the tax had been levied on consumers.* - ○ True - ○ False
Transcribed Image Text:**Scenario Analysis: Tax on Wine Producers** Suppose that the U.S. government decides to charge wine producers a tax. - **Before the tax:** - 25 billion bottles of wine were sold annually. - Price per bottle: $5. - **After the tax:** - 18 billion bottles of wine are sold annually. - Consumers pay $6 per bottle. - Producers receive $3 per bottle (after paying the tax). **Calculation:** 1. **Amount of the tax on a bottle of wine** - Tax per bottle: $___ 2. **Burden distribution:** - Burden on consumers: $___ per bottle. - Burden on producers: $___ per bottle. **Question:** Determine the accuracy of the following statement: *True or False: The effect of the tax on the quantity sold would have been smaller if the tax had been levied on consumers.* - ○ True - ○ False
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