Stacy places a $20 value on a bottle of wine,and Andrea places a $17 value on it.The equilibrium price for a bottle of wine is $15.Suppose the government levies a tax of $3 on each bottle of wine,and the equilibrium price of a bottle of wine increases to $18.How much tax revenue is collected?

Question

Quizplus · Accepted Answer

The tax revenue is equal to the tax per bottle multiplied by the number of bottles sold. The equilibrium price of a bottle of wine increases to $18, which means that the quantity of wine sold decreases. The tax revenue is therefore less than $3 per bottle. The only choice that is less than $3 is C) $3.

Stacy Places a $20 Value on a Bottle of Wine,and