If a $2 tax per bottle of wine is imposed on wine producers, which of the following will occur?
A) The price of wine will increase, fewer bottles will be purchased, and there will be a deadweight loss from this tax.
B) The price of wine will increase, more bottles will be purchased, and consumers will gain as the result of this tax.
C) The price of wine will decrease, more bottles will be purchased, and there will be a deadweight loss from this tax.
D) The price of wine and quantity sold will be unchanged.

Question

Quizplus · Accepted Answer

A tax on producers typically increases the price consumers pay, reduces the quantity sold, and creates a deadweight loss due to decreased market efficiency.

If a $2 Tax Per Bottle of Wine Is Imposed