Assume the market demand for cigarettes is as follows:     Price per pack 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 Quantity (packs per day) 100 90 80 70 60 50 40 30 20   Suppose further that smoking creates external costs valued at 50 cents per pack.   d.How large would a tax need to be in order to bring about this socially optimal level?

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Assume the market demand for cigarettes is as follows:

 

 

Price per pack

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

Quantity (packs per day)

100

90

80

70

60

50

40

30

20

 

Suppose further that smoking creates external costs valued at 50 cents per pack.

 

d.How large would a tax need to be in order to bring about this socially optimal level?

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