An estimated 80% increase in the retail price of cigarettes is necessary to cause a 30% drop in the number of cigarettes sold. Would such a price increase help or hurt the tobacco industry's profits? What would be the likely effect on industry profits if this price boost was simply caused by a $1.50 per pack increase in cigarette excise taxes?

An estimated 80% increase in the retail price of cigarettes is necessary to cause a 30% drop in the number of cigarettes sold. Would such a price increase help or hurt the tobacco industry's profits? What would be the likely effect on industry profits if this price boost was simply caused by a $1.50 per pack increase in cigarette excise taxes?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A79. Which of the following is the most likely consequence of implementing the ‘Unified Payments Interface (UPI)’? (a) Mobile wallets will not be necessary for online payments. (b) Digital currency will totally replace the physical currency in about two decades. (c) FDI inflows will drastically increase. (d) Direct transfer of subsidies to poor people will become very effective.
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(8) a.) (4) The United States Postal Service (USPS) charged $0.58 per stamp in 2022. They allow stamps.com to sell a sheet of twenty stamps with personalized photos for $1.20 per stamp. Stamps.com keeps the extra beyond the $0.58 it pays the USPS. If stamps.com is acting as a profit maximizing monopolist, what is their Lerner Index and what is the price elasticity of demand for a customized stamp? b.) (4) Suppose a movie theater determines that the elasticity of demand for movie tickets is -2.0 for senior citizens and –1.5 for adults under age 65, and the marginal cost is $4 per consumer. Use the Lerner index to determine the price senior citizens should be charged and the price adults under age 65 should be charged in order to maximize profits.
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