If a $2 Tax Per Bottle of Wine Is Imposed

question 57

Multiple Choice

If a $2 tax per bottle of wine is imposed on wine producers, which of the following will occur?

• A) The price of wine will increase, fewer bottles will be purchased, and there will be a deadweight loss from this tax.
• B) The price of wine will increase, more bottles will be purchased, and consumers will gain as the result of this tax.
• C) The price of wine will decrease, more bottles will be purchased, and there will be a deadweight loss from this tax.
• D) The price of wine and quantity sold will be unchanged.

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Definitions:

World Price

The international market price of a good or service, determined by global supply and demand.

Importer or Exporter

Entities that are involved in the trade of goods across international borders, where importers bring goods into a country and exporters send goods out of a country.

World Price

The international market price of a good or service, determined by global supply and demand factors.

Importer or Exporter

An entity or country that buys goods from (importer) or sells goods to (exporter) other countries.