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5. Calculating tax incidence Suppose that the U.S. government decides to charge beer producers a tax….
5. Calculating tax incidence Suppose that the U.S. government decides to charge beer producers a tax. Before the tax, 25 billion cases of beer were sold every year at a price of $7 per case. After the tax, 19 billion cases of beer are sold every year; consumers pay $8 per case, and producers receive $4 per case (after paying the tax) The amount of the tax on a case of beer is$ per case. Of this amount, the burden that falls on consumers isS per case, and the burden that falls on producers is$per case. True or False: The effect of the tax on the quantity sold would have been smaller if the tax had been levied on consumers. True False
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