Suppose that the government has a goal to reduce the demand for cigarettes in support of a health program. Given this, the government decided to impose a per-unit tax of 40 centavos per pack that is levied on the sellers or placed on the sale of cigarettes by the government. This causes a shift of the market supply of cigarettes from S to S' as shown. Price ($ per pack) S 1.50 1.40 1.30 1.15 D₂ Quantity 3 4 5 (Millions of pack) Answer the following questions regarding this case. 1. Determine the deadweight loss to society caused by the imposition of the tax. (3 points) Interpret the result. (3 points) | 2. What tax revenue is expected to be collected by the government? (4 points) 1.25 D₁

Suppose that the government has a goal to reduce the demand for cigarettes in support of a health program. Given this, the government decided to impose a per-unit tax of 40 centavos per pack that is levied on the sellers or placed on the sale of cigarettes by the government. This causes a shift of the market supply of cigarettes from S to S' as shown. Price ($ per pack) S 1.50 1.40 1.30 1.15 D₂ Quantity 3 4 5 (Millions of pack) Answer the following questions regarding this case. 1. Determine the deadweight loss to society caused by the imposition of the tax. (3 points) Interpret the result. (3 points) | 2. What tax revenue is expected to be collected by the government? (4 points) 1.25 D₁

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter12: The Partial Equilibrium Competitive Model

Section: Chapter Questions

Problem 12.10P

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