Suppose the Demand for Wine Is Elastic and That Initially

question 86

Multiple Choice

Suppose the demand for wine is elastic and that initially 5 million bottles of wine are produced and consumed in Australia. If the government imposes a tax of $2 per bottle of wine, the government will collect

• A) less than $10 million in tax revenues.
• B) $10 million in tax revenues.
• C) more than $10 million in tax revenues.
• D) an amount that may be more than, equal to, or less than $10 million in tax revenues depending on the price elasticity of demand.

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