2. Suppose that a per-unit tax of 25 centavos per pack is placed on the sale of cigarettes by the government, shifting the market supply of cigarettes from S1 to S2 as shown. Answer the following questions regarding this case. Price (S per pack) 1.60- 1.40 1.30 1.20 LIS 1.00 0.80- 060 0.40 0.20 Quantity (Millions of pack per year)

Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter5: Price Elasticity Of Demand And Supply
Section: Chapter Questions
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  1. Determine burden of the tax (or the incidence of the tax that falls on consumers and producer). Who gets most of the burden of the tax. Answer on the basis of elasticity.
  2. How much tax revenue is expected by the government to be raised for this good per year?

 

2. Suppose that a per-unit tax of 25 centavos per pack is placed on the sale of
cigarettes by the government, shifting the market supply of cigarettes from
S1 to S2 as shown. Answer the following questions regarding this case.
Price (S per pack)
1.60
S1
140
1.30
1.20
LIS
1.00
0.80
0.60
0.40
0.20
Quantity (Millions of pack per year)
Transcribed Image Text:2. Suppose that a per-unit tax of 25 centavos per pack is placed on the sale of cigarettes by the government, shifting the market supply of cigarettes from S1 to S2 as shown. Answer the following questions regarding this case. Price (S per pack) 1.60 S1 140 1.30 1.20 LIS 1.00 0.80 0.60 0.40 0.20 Quantity (Millions of pack per year)
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