Question: The French are only producers of Beaujolais wine. This is shipped around the world on the day it released with great fanfare. What is little known is that this is a tremendous joke France is playing on the rest of the world. They won’t drink this swill in France at any price or under any circumstances, preferring instead wine from nobler vines. One day, the minister of wine gets an idea to make the joke even funnier: apply an export fee. The idea is to add a fee of one Euro to every bottle shipped overseas to be collected by the central government.

a. Assume that the international demand for Beaujolais is downward sloping, and the domestic supply upward sloping. Do the welfare analysis for the free market case and export fee case. Of course, one is concerned only with the welfare of the French!

b. Are French Beaujolais producers better-off or worse-off? What about French consumers? Is France as a whole better-off or worse-off? What does it depend on?