Suppose that the government imposes a tax on cigarettes. Use the diagram below to answer the questions. D is the demand curve before tax, S is the supply curve before tax and St is the supply curve after the tax. Price 12 10 12 Qua (a) For the market for cigarettes without the tax, indicate: Seller's reservation price Price paid by consumers • Quantity of cigarettes sold Buyer's reservation price Price paid by producers (b) Calculate the consumer surplus before tax (c) Calculate the producer surplus before tax (d) For the market for cigarettes with the tax indicate Price received by producers Quantity of cigarettes sold Price paid by consumers The tax (e) Calculate the: consumer surplus after the tax producer surplus after the tax Tax revenue Deadweight loss Total surplus after tax

Suppose that the government imposes a tax on cigarettes. Use the diagram below to answer the questions. D is the demand curve before tax, S is the supply curve before tax and St is the supply curve after the tax. Price 12 10 12 Qua (a) For the market for cigarettes without the tax, indicate: Seller's reservation price Price paid by consumers • Quantity of cigarettes sold Buyer's reservation price Price paid by producers (b) Calculate the consumer surplus before tax (c) Calculate the producer surplus before tax (d) For the market for cigarettes with the tax indicate Price received by producers Quantity of cigarettes sold Price paid by consumers The tax (e) Calculate the: consumer surplus after the tax producer surplus after the tax Tax revenue Deadweight loss Total surplus after tax

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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