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:

Process Theories

Theories that focus on the psychological and behavioral processes that motivate individuals to achieve certain goals.

Content Theories

Theories that focus on identifying the specific factors, such as needs or desires, that motivate people.

Invisible Hand

A metaphor used by economist Adam Smith to describe the self-regulating behavior of the marketplace.

Free Market

An economic system where prices for goods and services are determined by open market and competition, without intervention from government.