Check if answers are correct for all sections. Please show your work and answer all sections of question a-c.The government raises taxes on cigarettes from $1 per to $2 per pack. Prior to the tax increase, 5 million packs were sold each year. The new equilibrium quantity is 4 million packs.a. Calculate the total revenue before and after the tax increase.Before the increase, tax revenue was $ 5million.After the increase, tax revenue was $8.million.b. Revenueincreasedwhich tells us that the price effectdominated.c. Now calculate the price and quantity effect of the tax increase.The price effect (the revenue gained from the increase in T) is $million,The quantity effect (the revenue lost from the decrease in Q) is $million. (remember to use a negative sign here since it's lost revenue)[Note: does this verify your answer from (b)?]If demand is elastic, an increase in the level of a tax willdecreasetax revenue.All other things equal, a tax onbreakfast cerealwould be likely to raise the greatest revenue, because demand is most inelasticAll other things equal, a tax oncigaretteswould cause the greatest deadweight loss.[ Select ]hamburgerscigarettesluxury watchesbreakfast cereal

(a) Before increase in tax, the tax rate was t0 = $1 and quantity sold was q0 = 5 million packs The…

The government raises taxes on cigarettes from $1 per to $2 per pack. Prior to the tax increase, 5 million packs were sold each year. The new equilibrium quantity is 4 million packs. a. Calculate the total revenue before and after the tax increase. Before the increase, tax revenue was $ 5 million. After the increase, tax revenue was $ million.

The government raises taxes on cigarettes from $1 per to $2 per pack. Prior to the tax increase, 5 million packs were sold each year. The new equilibrium quantity is 4 million packs. a. Calculate the total revenue before and after the tax increase. Before the increase, tax revenue was $ 5 million. After the increase, tax revenue was $ million.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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