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23 Sep 2018
5. Calculating tax incidence
Suppose that the U.S. government decides to charge wine producers a tax. Before the tax, 20,000 bottles of wine were sold every week at a price of $4 per bottle. After the tax, 13,000 bottles of wine are sold every week; consumers pay $5 per bottle, and producers receive $2 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.
True or False: The effect of the tax on the quantity sold would have been the same as if the tax had been levied on consumers.
5. Calculating tax incidence
Suppose that the U.S. government decides to charge wine producers a tax. Before the tax, 20,000 bottles of wine were sold every week at a price of $4 per bottle. After the tax, 13,000 bottles of wine are sold every week; consumers pay $5 per bottle, and producers receive $2 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.
True or False: The effect of the tax on the quantity sold would have been the same as if the tax had been levied on consumers.
Tod ThielLv2
23 Sep 2018
