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sume the government taxes packs of cigarettes both to discourage cigarette smoking and to raise tax revenue. The average excise on a pack of cigarettes Is $2.50 per pack. The table below presents the annual demand and supply schedules, In billions of packs. th before and after the tax on packs of cigarettes. arket for Cigarettes Price (dollars par pack) $18.00 9.75 9.50 9.25 9.98 8.75 8.58 8.25 8.08 7.75 7.58 7.25 7.08 6.75 6.58 6.25 6.90 5.75 5.50 5.25 5.00 4.75 4.50 Quantity of Cigarettes Demanded (billions of packs) 5.0 7.5 18.0 12.5 15.8 17.5 29.0 22.5 25.0 27.5 30.0 32.5 35.0 37.5 40.8 42.5 45.0 47.5 58.0 52.5 55.0 57.5 60.0 Quantity of cigarettes supplied (billions of packs) 65.0 62.5 60.0 57.5 55.0 52.5 50.0 47.5 45.0 42.5 40.0 37.5 35.0 32.5 30.0 27.5 25.0 22.5 28.0 17.5 15.0 12.5 10.0 Quantity of Cigarettes Supplied with Yax (billions of packs) 48.0 37.5 35.0 32.5 30.0 27.5 25.8 22.5 28.8 17.5 15.8 12,5 18.0 a. What are the equilibrium quantity and price per pack of cigarettes if there is no excise tax on cigarettes? O 225 billlon packs: $7.00 per pack O 225 billion packs: $8.00 per pack O 35 blllion packs; $8.00 per pack 035 billion packs: $7.00 per pack b. What are the equilibrium quantity and price per pack of cigarettes If there is a $2.50 excise tax per pack on cigarettes? O 35 billlon packs; $7.00 per pack O 35 billion packs; $8.25 per pack 22.5 billlon packs: $9.25 per pack O 22.5 billion packs: $7.00 per pack c. How much tax revenue does the $2.50 per pack excise tax on cigarettes generate each year? O $56.25 billion O $75.00 billion O None -no cigarettes will be purchased O $87.50 ballon d. By how many packs of cigarettes does quantity demanded decrease due to the excise tax on cigarettes? 35 billion packs per year 25 billion packs per year 12.5 billion packs per year Q22.5 billion packs per year e. By how much did the price paid by consumers change due to the tax on cigarettes? $2.50 per pack $0.50 per pack $125 per pack 10 LO

sume the government taxes packs of cigarettes both to discourage cigarette smoking and to raise tax revenue. The average excise on a pack of cigarettes Is $2.50 per pack. The table below presents the annual demand and supply schedules, In billions of packs. th before and after the tax on packs of cigarettes. arket for Cigarettes Price (dollars par pack) $18.00 9.75 9.50 9.25 9.98 8.75 8.58 8.25 8.08 7.75 7.58 7.25 7.08 6.75 6.58 6.25 6.90 5.75 5.50 5.25 5.00 4.75 4.50 Quantity of Cigarettes Demanded (billions of packs) 5.0 7.5 18.0 12.5 15.8 17.5 29.0 22.5 25.0 27.5 30.0 32.5 35.0 37.5 40.8 42.5 45.0 47.5 58.0 52.5 55.0 57.5 60.0 Quantity of cigarettes supplied (billions of packs) 65.0 62.5 60.0 57.5 55.0 52.5 50.0 47.5 45.0 42.5 40.0 37.5 35.0 32.5 30.0 27.5 25.0 22.5 28.0 17.5 15.0 12.5 10.0 Quantity of Cigarettes Supplied with Yax (billions of packs) 48.0 37.5 35.0 32.5 30.0 27.5 25.8 22.5 28.8 17.5 15.8 12,5 18.0 a. What are the equilibrium quantity and price per pack of cigarettes if there is no excise tax on cigarettes? O 225 billlon packs: $7.00 per pack O 225 billion packs: $8.00 per pack O 35 blllion packs; $8.00 per pack 035 billion packs: $7.00 per pack b. What are the equilibrium quantity and price per pack of cigarettes If there is a $2.50 excise tax per pack on cigarettes? O 35 billlon packs; $7.00 per pack O 35 billion packs; $8.25 per pack 22.5 billlon packs: $9.25 per pack O 22.5 billion packs: $7.00 per pack c. How much tax revenue does the $2.50 per pack excise tax on cigarettes generate each year? O $56.25 billion O $75.00 billion O None -no cigarettes will be purchased O $87.50 ballon d. By how many packs of cigarettes does quantity demanded decrease due to the excise tax on cigarettes? 35 billion packs per year 25 billion packs per year 12.5 billion packs per year Q22.5 billion packs per year e. By how much did the price paid by consumers change due to the tax on cigarettes? $2.50 per pack $0.50 per pack $125 per pack 10 LO

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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### Market for Cigarettes: Supply and Demand Analysis #### Overview The government has imposed a tax on cigarettes to both discourage smoking and increase tax revenue. This exercise tax is set at $2.50 per pack. Below is a detailed analysis of the market conditions before and after the implementation of this tax. #### Cigarette Market Table | Price (dollars per pack) | Quantity of Cigarettes Demanded (billions of packs) | Quantity of Cigarettes Supplied (billions of packs) | Quantity of Cigarettes Supplied with Tax (billions of packs) | |---|---|---|---| | 10.00 | 5.0 | 65.0 | 40.0 | | 9.75 | 6.5 | 62.5 | 37.5 | | 9.50 | 7.5 | 61.0 | 36.0 | | 9.25 | 8.5 | 58.5 | 35.0 | | 9.00 | 9.5 | 57.0 | 32.5 | | 8.75 | 10.5 | 54.5 | 30.0 | | 8.50 | 11.5 | 52.0 | 27.5 | | 8.25 | 12.5 | 48.5 | 25.0 | | 8.00 | 15.0 | 45.0 | 22.5 | | 7.75 | 17.5 | 42.5 | 20.0 | | 7.50 | 20.5 | 40.0 | 17.5 | | 7.25 | 23.5 | 37.5 | 15.0 | | 7.00 | 27.5 | 35.0 | 12.5 | | 6.75 | 32.5 | 32.5 | 10.0 | | 6.50 | 37.5 | 30.0 | - | | 6.25 | 42.5 | 28.0 | - | | 6.00 | 47.5 | 25.0 | - | | 5.75 | 52.5 | 22.5 | - | | 5.50 |
Transcribed Image Text:### Market for Cigarettes: Supply and Demand Analysis #### Overview The government has imposed a tax on cigarettes to both discourage smoking and increase tax revenue. This exercise tax is set at $2.50 per pack. Below is a detailed analysis of the market conditions before and after the implementation of this tax. #### Cigarette Market Table | Price (dollars per pack) | Quantity of Cigarettes Demanded (billions of packs) | Quantity of Cigarettes Supplied (billions of packs) | Quantity of Cigarettes Supplied with Tax (billions of packs) | |---|---|---|---| | 10.00 | 5.0 | 65.0 | 40.0 | | 9.75 | 6.5 | 62.5 | 37.5 | | 9.50 | 7.5 | 61.0 | 36.0 | | 9.25 | 8.5 | 58.5 | 35.0 | | 9.00 | 9.5 | 57.0 | 32.5 | | 8.75 | 10.5 | 54.5 | 30.0 | | 8.50 | 11.5 | 52.0 | 27.5 | | 8.25 | 12.5 | 48.5 | 25.0 | | 8.00 | 15.0 | 45.0 | 22.5 | | 7.75 | 17.5 | 42.5 | 20.0 | | 7.50 | 20.5 | 40.0 | 17.5 | | 7.25 | 23.5 | 37.5 | 15.0 | | 7.00 | 27.5 | 35.0 | 12.5 | | 6.75 | 32.5 | 32.5 | 10.0 | | 6.50 | 37.5 | 30.0 | - | | 6.25 | 42.5 | 28.0 | - | | 6.00 | 47.5 | 25.0 | - | | 5.75 | 52.5 | 22.5 | - | | 5.50 |
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