20-2=Q+2Q p=20-2x6-20-12-8 so, the equilibrium price is $8 18-30 In an effort to decrease cigarette sales, the Chapel Hill city council has decided to impose a $4 tax on the buyers of cigarettes. b. What is the tax wedge? С Sketch a graph showing the effect of the tax. Clearly label MPC, MSC, MPB, MSB, CS, PS, the tax revenue (TR), and DWL. d. Calculate PUYER, PSELLER, and QTAX. Pbuyer=$32/$3-$10.67 Pseller=$20/$3-$6.67 Qtax = $14/$3-4.67 MBP 8 f. Is the tax outcome efficient? Why or why not? I e. Calculate consumer surplus, producer surplus, deadweight loss, and the total tax revenue & List a supply shifter that also would have decreased the amount of cigarettes bought and sold.
20-2=Q+2Q p=20-2x6-20-12-8 so, the equilibrium price is $8 18-30 In an effort to decrease cigarette sales, the Chapel Hill city council has decided to impose a $4 tax on the buyers of cigarettes. b. What is the tax wedge? С Sketch a graph showing the effect of the tax. Clearly label MPC, MSC, MPB, MSB, CS, PS, the tax revenue (TR), and DWL. d. Calculate PUYER, PSELLER, and QTAX. Pbuyer=$32/$3-$10.67 Pseller=$20/$3-$6.67 Qtax = $14/$3-4.67 MBP 8 f. Is the tax outcome efficient? Why or why not? I e. Calculate consumer surplus, producer surplus, deadweight loss, and the total tax revenue & List a supply shifter that also would have decreased the amount of cigarettes bought and sold.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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I need help with b, the graph, and e - g.
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C.
11. The market for cigarettes in Chapel Hill is given by the following demand and supply curves, where Q is packs of
cigarettes:
:
P = 20-20p and P = 2+ Qs
Assume that each pack of cigarettes smoked imposes an external cost of $6/pack on others in the form of second hand
smoke.
a. Calculate the equilibrium price and quantity of cigarettes.
20-2=Q+20
Q=18/36
p=20-2x6-20-12-8
so, the equilibrium price is $8
18-30
In an effort to decrease cigarette sales, the Chapel Hill city council has decided to impose a $4 tax on the buyers of
cigarettes.
b. What is the tax wedge?
e.
1.5pt = B I U G A A
d. Calculate PBUYER, PSELLER, and QTAX.
Pbuyer = $32/$3= $10.67
Pseller=$20/$3 = $6.67
Qtax = $14/$34.67
Sketch a graph showing the effect of the tax. Clearly label MPC, MSC, MPB, MSB, CS, PS, the tax revenue (TR),
and DWL.
MBP 8
I
Calculate consumer surplus, producer surplus, deadweight loss, and the total tax revenue
f.
Is the tax outcome efficient? Why or why not?
g List a supply shifter that also would have decreased the amount of cigarettes bought and sold.
X₂
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Step 1: Define tax wedge
VIEWStep 2: b. Determine the tax wedge
VIEWStep 3: c. Draw the graph
VIEWStep 4: e. Calculate consumer surplus, producer surplus, DWL and TR
VIEWStep 5: f. Determine whether the tax outcome is efficient or not
VIEWStep 6: g. List a supply shifter that also decrease the amount of cigarette bought and sold
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