1.Assume the market demand for cigarettes is as follows: Price per pack 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 Quantity (packs per day) 100 90 80 70 60 50 40 30 20 Suppose further that smoking creates external costs valued at 50 cents per pack. a.Draw the social and market demand curves b.At 3.50 per pack, what quantity is demanded in the market? c.What is the socially optimal quantity at that price?
Answer the question 2 please
1.Assume the market demand for cigarettes is as follows:
|
|
1.00 |
1.50 |
2.00 |
2.50 |
3.00 |
3.50 |
4.00 |
4.50 |
5.00 |
|
Quantity (packs per day) |
100 |
90 |
80 |
70 |
60 |
50 |
40 |
30 |
20 |
Suppose further that smoking creates external costs valued at 50 cents per pack.
a.Draw the social and market demand
b.At 3.50 per pack, what quantity is demanded in the market?
c.What is the socially optimal quantity at that price?
d.How large would a tax need to be in order to bring about this socially optimal level?
1..Suppose in problem 1 that a tax of $1 per pack is imposed.
a.How many packs will be consumed?
b.Is this rate too high, too low, or the socially optimal rate of consumption?
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