3. The weekly supply and demand for packs of cigarettes in Carcinia is given in Figure 18P-1. [ LO 18.2] a. Suppose cigarette smoking causes a $6/pack external cost on non-smokers. Draw the demand curve that would exist if the externality associated with smoking were internalized by consumers. b. How many packs of cigarettes are consumed per week? c. What is the efficient number of cigarette packs? d. What would be the total gain in surplus if this externality could be internalized? FIGURE 18P-1 Price ($) 36 34 32 30 28 26 24 22 20 18 SHZOB642 16 14 12 10 8 S 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 Packs of cigarettes (millions)

3. The weekly supply and demand for packs of cigarettes in Carcinia is given in Figure 18P-1. [ LO 18.2] a. Suppose cigarette smoking causes a $6/pack external cost on non-smokers. Draw the demand curve that would exist if the externality associated with smoking were internalized by consumers. b. How many packs of cigarettes are consumed per week? c. What is the efficient number of cigarette packs? d. What would be the total gain in surplus if this externality could be internalized? FIGURE 18P-1 Price ($) 36 34 32 30 28 26 24 22 20 18 SHZOB642 16 14 12 10 8 S 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 Packs of cigarettes (millions)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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