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. d.How large would a tax need to be in order to bring about this socially optimal level?

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. d.How large would a tax need to be in order to bring about this socially optimal level?

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter17: Externalities And The Environment

Section: Chapter Questions

Problem 2.4P

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