Question 6:Suppose that the market for cigarettes in a particulartown has the following supply and demand curves:QS = P; QD = 60 - P.1. What is the equilibrium quantity and price?2. Suppose that the town council wants to reducecigarette consumption. It imposes a quantity taxper unit of cigarettes on the consumer side. Findthe new equilibrium quantity, the equilibrium pricepaid by the consumer, and the equilibrium pricereceived by the producer.3. Suppose the flat tax is 20. What is the newequilibrium quantity, the price paid by consumer,and the price received by the supplier?4. Use the results from Q6.3, compute the consumersurplus before and after tax. Draw the supply anddemand curve and label the equilibrium quantityand prices. Also shade the area of the consumersurplus before and after tax.5. If the council wants to reduce cigarette sales to 5,what would the appropriate tax be?

Please note due to the alotted time constraint and Bartleby Guidelines, I would be able to solve the…

Answered: Suppose that the market for cigarettes…

Principles Of Marketing

17th Edition

ISBN:9780134492513

Author:Kotler, Philip, Armstrong, Gary (gary M.)

Publisher:Kotler, Philip, Armstrong, Gary (gary M.)

Chapter1: Marketing: Creating Customer Value And Engagement

Section: Chapter Questions

Problem 1.1DQ

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