MICROECONOMICS-ACCESS CARD <CUSTOM>
MICROECONOMICS-ACCESS CARD <CUSTOM>
11th Edition
ISBN: 9781266285097
Author: Colander
Publisher: MCG CUSTOM
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Chapter 7, Problem 5IP

(a)

To determine

Explain what was the professor argument regarding revenue.

(b)

To determine

Explain the program distinguish among top-performing students.

(c)

To determine

Explain why the president did not reduce tuition for all students.

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The government commissioned a research firm, Super Consulting, to conduct a study on the market demand for cigarettes in Malaysia. The firm reported that the price elasticity of demand for cigarettes is about 0.4. If a pack of cigarettes costs $2 and the government wants to reduce smoking by 20 percent, by how much should it increase the price? If the government permanently increases the price of cigarettes, will the policy have a larger effect on smoking after 1 year from now or 5 years from now? Explain Super Consulting also found that teenagers have higher price elasticity than adults. Why might this be true? Explain Outline and discuss the appropriate economic policies that can be implemented to reduce smoking.
To encourage people to stop smoking the government of a country introduces an indirect tax of 20% on the price of cigarettes(Currently 10$ per packet). The price elasticity of demand for cigarettes in the country is estimated to be 0.6. Describe the likely impact the tax will have on a, the demand for cigarettes b, government revenue
"If the government wishes to tax certain goods, it should tax goods that have inelastic rather than elastic demand". What is the rationale for this statement?
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