Suppose Sellers of Liquor Are Required to Send $1

question 471

Multiple Choice

Suppose sellers of liquor are required to send $1.00 to the government for every bottle of liquor they sell.Further,suppose this tax causes the price paid by buyers of liquor to rise by $0.80 per bottle.Which of the following statements is correct?

• A) This tax causes the supply curve for liquor to shift upward by $1.00 at each quantity of liquor.
• B) The effective price received by sellers is $0.20 per bottle less than it was before the tax.
• C) Eighty percent of the burden of the tax falls on buyers.
• D) All of the above are correct.

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Definitions:

Value of Money

The purchasing power of money, indicating how much goods or services one unit of money can buy.

Excess Supply

A market situation where the quantity of a good or service supplied is greater than the quantity demanded at the current price.

Deflation

Deflation is a decrease in the general price level of goods and services in an economy over a period, indicating negative inflation.

Money Demand Curve

A graphical representation illustrating the relationship between the quantity of money demanded and the interest rate, showing how they vary inversely.