Suppose that the U.S. government decides to charge wine producers a tax. Before the tax, 30 billion bottles of wine were sold every year at a price of 57 per bottle. After the tax, 25 billion bottles of wine are sold every year; consumers pay $9 per bottle, and producers receive $6 per bottle (after paying the tax). The amount of the tax on a bottle of wine is S per bottle. Of this amount, the burden that falls on consumers is s per bottle, and the purden that falls on producers is s per bottle.

Suppose that the U.S. government decides to charge wine producers a tax. Before the tax, 30 billion bottles of wine were sold every year at a price of 57 per bottle. After the tax, 25 billion bottles of wine are sold every year; consumers pay $9 per bottle, and producers receive $6 per bottle (after paying the tax). The amount of the tax on a bottle of wine is S per bottle. Of this amount, the burden that falls on consumers is s per bottle, and the purden that falls on producers is s per bottle.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter6: Supply, Demand And Government Policies

Section6.2: Taxes

Problem 2QQ

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