Essay
In order to fund health care, the government passes a bill that proposes to establish a per pack tax of $5 on cigarettes levied on sellers. Suppose the supply of cigarettes is given by P = Q/4 and demand for cigarettes is given by P = 200 - Q.
i)What will be the impact of this bill? Specifically, how many fewer packs will be smoked?
ii)What will be the consumer surplus, producer surplus, and dead weight loss with the tax?
iii)How much revenue will the government collect?
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i)Without the tax: P and Q are where 200...View Answer
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