Assume That Cigarettes Sell for $7 Per Pack in New

Multiple Choice

Assume that cigarettes sell for $7 per pack in New Jersey and $3 per pack in South Carolina, and New Jersey taxes cigarettes at $3.00 per pack and South Carolina taxes cigarettes at $0.10 per pack. How might cigarette sellers respond to the after-tax price differential between the two states?

A) Cigarette sellers will increase the supply of cigarettes to New Jersey and decrease the supply of cigarettes to South Carolina.
B) Cigarette sellers will decrease the supply of cigarettes to New Jersey and increase the supply of cigarettes to South Carolina.
C) Cigarette sellers will decrease the supply of cigarettes to both New Jersey and South Carolina.
D) Cigarette sellers will increase the supply of cigarettes to both New Jersey and South Carolina.