A State Government Wants to Increase the Taxes on Cigarettes

Multiple Choice

A state government wants to increase the taxes on cigarettes to increase tax revenue. Because cigarettes are addictive, we would expect its demand to be

A) elastic. Thus, the government's cigarette-tax revenues would rise with a tax increase.
B) elastic. Thus, the government's cigarette-tax revenues would fall with a tax increase.
C) inelastic. Thus, the government's cigarette-tax revenues would fall with a tax increase.
D) inelastic. Thus, the government's cigarette-tax revenues would rise with a tax increase.