a. Draw the social and market demand curves b. At 3.50 per pack, what quantity is demanded in the market? 50 packs c. What is the socially optimal quantity at t

ECON MICRO
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ISBN:9781337000536
Author:William A. McEachern
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Chapter17: Externalities And The Environment
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2. 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 Quanti ty (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? 50 packs 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? ?

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