Suppose the Demand for Wine Is Elastic and That Initially

question 231

Multiple Choice

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

• A) more than $10 million in tax revenues.
• B) $10 million in tax revenues.
• C) less 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 precise elasticity of demand.