Please provide explanations! Thank you! Suppose that the U.S. government decides

Question

Please provide explanations! Thank you!

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 $5 per bottle. After the tax, 14,000 bottles of wine are sold every week; consumers pay $6 per bottle, and producers receive $2 per bottle (after paying the tax) The amount of the tax on a bottle of wine is burden that falls on producers isper bottle. per bottle. Of this amount, the burden that falls on consumers is per bottle, and the 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 True False

Explanation / Answer

ANSWER:

The amount of the tax on a bottle of wine is $4 per bottle. of this amount, the burden that falls on consumers is $1 per bottle. and the burden that falls on producers is $3 per bottle.

explanation : after the tax is imposed, the buyer's total cost of purchasing a bottle of wine rises from $5 to $6. the tax also reduces the price producers recieve from $5 to $2 per bottle. the tax imposed is equal to the difference between the two prices.

false as if more tax was levied on consumers then the quantity sold would have decreased further as with $1 tax burden reduced quantity sold by 6,000 bottles ( 20,000 - 14,000) and therefore if more tax was levied on consumers , the consumption would further go down.

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