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Question 6: Suppose that the market for cigarettes in a particular town has the following supply and demand curves: QS = P; QD = 60 - P. 2. Suppose that the town council wants to reduce cigarette consumption. It imposes a quantity tax per unit of cigarettes on the consumer side. Find the new equilibrium quantity, the equilibrium pric paid by the consumer, and the equilibrium price received by the producer. 3. Suppose the flat tax is 20. What is the new equilibrium quantity, the price paid by consumer, and the price received by the supplier? 4. Use the results from Q6.3, compute the consume surplus before and after tax. Draw the supply and demand curve and label the equilibrium quantity and prices. Also shade the area of the consumer surplus before and after tax. 5. If the council wants to reduce cigarette sales to 5 what would the appropriate tax be?

Question 6: Suppose that the market for cigarettes in a particular town has the following supply and demand curves: QS = P; QD = 60 - P. 2. Suppose that the town council wants to reduce cigarette consumption. It imposes a quantity tax per unit of cigarettes on the consumer side. Find the new equilibrium quantity, the equilibrium pric paid by the consumer, and the equilibrium price received by the producer. 3. Suppose the flat tax is 20. What is the new equilibrium quantity, the price paid by consumer, and the price received by the supplier? 4. Use the results from Q6.3, compute the consume surplus before and after tax. Draw the supply and demand curve and label the equilibrium quantity and prices. Also shade the area of the consumer surplus before and after tax. 5. If the council wants to reduce cigarette sales to 5 what would the appropriate tax be?

Principles of Microeconomics (MindTap Course List)
Principles of Microeconomics (MindTap Course List)
8th Edition
ISBN:9781305971493
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter6: Supply, Demand And Government Policies
Section: Chapter Questions
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Question 6: Suppose that the market for cigarettes in a particular town has the following supply and demand curves: QS = P; QD = 60 - P. 2. Suppose that the town council wants to reduce cigarette consumption. It imposes a quantity tax per unit of cigarettes on the consumer side. Find the new equilibrium quantity, the equilibrium price paid by the consumer, and the equilibrium price received by the producer. 3. Suppose the flat tax is 20. What is the new equilibrium quantity, the price paid by consumer, and the price received by the supplier? 4. Use the results from Q6.3, compute the consumer surplus before and after tax. Draw the supply and demand curve and label the equilibrium quantity and prices. Also shade the area of the consumer surplus before and after tax. 5. If the council wants to reduce cigarette sales to 5, what would the appropriate tax be?
Transcribed Image Text:Question 6: Suppose that the market for cigarettes in a particular town has the following supply and demand curves: QS = P; QD = 60 - P. 2. Suppose that the town council wants to reduce cigarette consumption. It imposes a quantity tax per unit of cigarettes on the consumer side. Find the new equilibrium quantity, the equilibrium price paid by the consumer, and the equilibrium price received by the producer. 3. Suppose the flat tax is 20. What is the new equilibrium quantity, the price paid by consumer, and the price received by the supplier? 4. Use the results from Q6.3, compute the consumer surplus before and after tax. Draw the supply and demand curve and label the equilibrium quantity and prices. Also shade the area of the consumer surplus before and after tax. 5. If the council wants to reduce cigarette sales to 5, what would the appropriate tax be?
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