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According to Professor Becker, by how much would cigarette prices have to rise to get a 20 percent reduction in smoking in Instructions: Enter your responses as a percentage rounded to one decimal place. a. one year? percent b. three years? percent

According to Professor Becker, by how much would cigarette prices have to rise to get a 20 percent reduction in smoking in Instructions: Enter your responses as a percentage rounded to one decimal place. a. one year? percent b. three years? percent

Exploring Economics
Exploring Economics
8th Edition
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:Robert L. Sexton
Chapter17: Income, Poverty, And Health Care
Section: Chapter Questions
Problem 1P
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Professor Becker Rejects Clinton's Tax Math In seeking ways to balance the federal budget, President Clinton has seized on the excise tax on cigarettes. That tax, now at 24 cents per pack, brought in around $12 billion in federal revenue last year. President Clinton says that raising that tax by $1 a pack could generate another $53 billion over the next five years. Chicago professor and Nobel laureate Gary Becker says the president is blowing smoke. A quadrupling of the excise tax will convince a lot of smokers to quit-or at least smoke less. Because smoking is addictive, the decline in smoking won't be immediate. In the short run every 10 percent hike in the price of cigarettes will reduce consumption by only 4 percent. But in the long run, smoking will decline by about 7 percent. As a result, the tax hike will bring in only a fraction of what Clinton anticipates. Source. Media reports, 1994.
Transcribed Image Text:Professor Becker Rejects Clinton's Tax Math In seeking ways to balance the federal budget, President Clinton has seized on the excise tax on cigarettes. That tax, now at 24 cents per pack, brought in around $12 billion in federal revenue last year. President Clinton says that raising that tax by $1 a pack could generate another $53 billion over the next five years. Chicago professor and Nobel laureate Gary Becker says the president is blowing smoke. A quadrupling of the excise tax will convince a lot of smokers to quit-or at least smoke less. Because smoking is addictive, the decline in smoking won't be immediate. In the short run every 10 percent hike in the price of cigarettes will reduce consumption by only 4 percent. But in the long run, smoking will decline by about 7 percent. As a result, the tax hike will bring in only a fraction of what Clinton anticipates. Source. Media reports, 1994.
According to Professor Becker, by how much would cigarette prices have to rise to get a 20 percent reduction in smoking in Instructions: Enter your responses as a percentage rounded to one decimal place. a. one year? percent b. three years? percent
Transcribed Image Text:According to Professor Becker, by how much would cigarette prices have to rise to get a 20 percent reduction in smoking in Instructions: Enter your responses as a percentage rounded to one decimal place. a. one year? percent b. three years? percent
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