Mail-order sales of wine are illegal in some states. Some wineries argue that the ability to ship directly to consumers helps small wineries and that shipping bans unfairly protect home-state wineries, raising prices to consumers. Others argue that the bans allow states to collect tax revenues and to keep wine from being sold to minors. Economists looking at this case would say that one effect of the ban is to prevent:
A) reverse engineering.
B) a network externality.
C) competition to existing sellers.
D) a winner-takes-all market.

Question

Quizplus · Accepted Answer

The ban on mail-order sales of wine prevents competition to existing sellers by limiting consumer access to out-of-state wineries, thus protecting local wineries from competition.

Mail-Order Sales of Wine Are Illegal in Some States