6. (19 pts) The figure below represents demand and supply in the market for cigarettes. Use the diagram to answer the following questions. Price ($ per pack) S2 Таx $2.50 1.50 1.25 Demand Quantity (billions of packs per year) 01 18 20 a. How much is the government tax on each pack of cigarettes?250-14 b. What portion of the unit tax is paid by consumers? c. What portion of the unit tax is paid by producers? d. What is the quantity sold after the imposition of the tax? e. What is the after-tax revenue per pack received by producers? f. What is the total tax revenue collected by the government? g. What is the value of the excess burden of the tax? h. Is this cigarette tax efficient?

6. (19 pts) The figure below represents demand and supply in the market for cigarettes. Use the diagram to answer the following questions. Price ($ per pack) S2 Таx $2.50 1.50 1.25 Demand Quantity (billions of packs per year) 01 18 20 a. How much is the government tax on each pack of cigarettes?250-14 b. What portion of the unit tax is paid by consumers? c. What portion of the unit tax is paid by producers? d. What is the quantity sold after the imposition of the tax? e. What is the after-tax revenue per pack received by producers? f. What is the total tax revenue collected by the government? g. What is the value of the excess burden of the tax? h. Is this cigarette tax efficient?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter5: Elasticity

Section: Chapter Questions

Problem 20RQ: Under which circumstances does line tax burden fall entirely on consumers?

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