Effect of the tax on the quantity sold

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Reference no: EM13741706

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.

Reference no: EM13741706

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