Which of the following producers would you expect to support a tax on beer? Whic

Question

Which of the following producers would you expect to support a tax on beer? Which would not?

a. Producers of hard liquor. ( would or would not ) Cross-price elasticity with beer: 0.11. Producers of hard liquor support a tax on beer because the cross-price elasticity is negative. This means that the beer tax would ( A) increase liquor consumption but decrease the price that consumers would be willing to pay for liquor B) Increase liquor consumption C) reduce liquor consumption or D) increase the price that consumers would be willing to pay for liquor )

Explanation / Answer

Would support a tax on beer D increase the price that consumers would bre willing to pay for liquor.

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