Exhibit 11-5 Price Paid For Producer Intermediate Goods Price Sells For Farmer $0 $0.60 Miller $0.60 $1.40 Baker $1.40 $2.50 Assume that the farmer grows wheat and sells it to the miller, the miller turns the wheat into flour and sells it to the baker, and the baker turns the flour into bread and sells it to the final consumer. Refer to Exhibit 11-5 which summarizes the situation prior to the value added tax (VAT). If the government imposes a VAT rate of 10 percent, the government will receive in VAT revenue per loaf of bread sold and the final consumer will find that he has to pay more for a loaf of bread than he did prior to the VAT tax. O $0.25; $2.53 O $0.11; $2.75 $0.25; $0.25 $0.03; $2.75