Scenario: When the Price of Wine Is $10 Per Bottle

question 21

Multiple Choice

Scenario: When the price of wine is $10 per bottle, Thomas purchases 30 bottles of wine per month. Suppose the government levies a 50 percent tax on all alcoholic beverages . The burden of this tax is to be completely borne by the consumers. This reduces Thomas's consumption to 20 bottles of wine per month.
-Refer to the scenario above.After the implementation of the tax,Thomas's expenditure on wine will ________.

• A) remain the same
• B) increase by $50
• C) decrease by $50
• D) increase by $100

---

Definitions:

Capacity Utilization

A measure of how effectively an entity uses its production capacity to produce goods, expressed as a percentage of total potential output.

Cyclical Industry

An industry highly sensitive to the economic cycle, experiencing rapid growth in booming economies and significant declines during recessions.

Automobile Industry

The automobile industry encompasses the wide range of companies and activities involved in the design, manufacturing, marketing, and selling of motor vehicles.

Tobacco Industry

Comprises companies and entities that manufacture, market, and distribute tobacco and tobacco-related products.