Suppose that the U. S. government decides to charge wine consumers a tax. Before the tax, 25 million bottles of wine were sold every month at a price of $7 per bottle. After the tax, 18 million bottles of wine are sold every month; consumers pay $8 per bottle (including the tax), and producers receive $5 per bottle.

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 smaller if the tax had been levied on producers.

True

False

False

Explanation:

Since the sum of money paid by consumer is $8 per bottle and the sum of money that is been paid by the manufacturer is $5 per bottle.

This means the sum of tax on wine will be $3 = ($8 – $5) per case.

prior to tax, the cost of buying the bottle of wine is $7. Calculating the tax burden on consumers and on producers, are as follows:

Tax burden on consumers = Price paid after tax - Price paid before tax

                                          = $8-$7

                                      = $1

Tax burden on producers = Price received before tax - Price received after tax

                                            = $7-$5

                                            = $2

consequently, the burden of tax that the consumers are expected to pay is $1 per bottle and the burden of tax that the producer is expected to pay is $2 per bottle.

The given statement in the question is False. Regardless of whether the tax is levied on consumers or producers, the effect is the same.

they work in some type of way

answer; someone must cover the cost associated with the provision of scarce goods in both sectors;