Figure 4-9Priceper pack$12CO5Tax4070StaxSupplyDemandQuantity of cigarettes(1000s of packs)Figure 4-9 shows the market for cigarettes. The governmentplans to impose a per-unit tax in this market.Refer to Figure 4-9. As a result of the tax, is there a loss inproducer surplus? Refer to Figure 4-9. As a result of the tax, is there a loss inproducer surplus?AYes, because producers are not selling as manyunits now.BCNo, because the consumer pays the tax.No, because the market reaches a newequilibrium.DNo, because producers are able to raise the priceto cover their tax burden.

Equilibrium occurs at the intersection of demand and supply curves. Imposition of tax decreases…

Figure 4-9 Price per pack $12 CO 5 Tax 40 70 Stax Supply Demand Quantity of cigarettes (1000s of packs) Figure 4-9 shows the market for cigarettes. The government plans to impose a per-unit tax in this market. Refer to Figure 4-9. As a result of the tax, is there a loss in producer surplus?

Figure 4-9 Price per pack $12 CO 5 Tax 40 70 Stax Supply Demand Quantity of cigarettes (1000s of packs) Figure 4-9 shows the market for cigarettes. The government plans to impose a per-unit tax in this market. Refer to Figure 4-9. As a result of the tax, is there a loss in producer surplus?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Figure 4-9
Price
per pack
$12
CO
5
Tax
40
70
Stax
Supply
Demand
Quantity of cigarettes
(1000s of packs)
Figure 4-9 shows the market for cigarettes. The government
plans to impose a per-unit tax in this market.
Refer to Figure 4-9. As a result of the tax, is there a loss in
producer surplus?

Refer to Figure 4-9. As a result of the tax, is there a loss in
producer surplus?
A
Yes, because producers are not selling as many
units now.
B
C
No, because the consumer pays the tax.
No, because the market reaches a new
equilibrium.
D
No, because producers are able to raise the price
to cover their tax burden.

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