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5. Calculating tax incidence Suppose that the U.S. government decides to charge wine producers a tax. Before the tax, 50,000 bottles of wine were sold
5. Calculating tax incidence Suppose that the U.S. government decides to charge wine producers a tax. Before the tax, 50,000 bottles of wine were sold every week at a price of $5 per bottle. After the tax, 43,000 bottles of wine are sold every week; consumers pay $8 per bottle, and producers receive $3 per bottle (after paying the tax). The amount of the tax on a bottle of wine is S burden that falls on producers is 5 per bottle per bottle of this amount, the burden that falls on consumers is 5 per bottle, and the True or False: The effect of the tax on the quantity sold would have been larger if the tax had been levied on consumers. 0 Truch False
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