Is this tax strategy successful in reducing smoking

Reference no: EM13189231

The market for cigarettes in Canada has been the topic of a lot of debate. Let's think about how this market works and how it is affected by government intervention. Suppose the demand and supply curves for cigarettes are the following:

Demand: P = 70 - 0.1Qd Supply: P = 0.2Qs + 10

The price is in dollars and quantity is in millions of cartons per week.

(i) What is the market equilibrium in cigarettes?

(ii) Suppose the government places a $15 per carton excise tax on cigarettes in an effort to reduce smoking. Cigarette producers are required to pay this tax out of their revenues. Draw the supply and demand graph based on the original supply and demand curves, and then show the change caused by this tax. What is the new equilibrium price and quantity?

(iii) There are several implications of this tax program for the various groups in the economy. Let's consider each:

Consumers: How much have prices increased for consumers?
Producers: How much do producers receive per pack AFTER they pay the excise tax?
Government: How much money is collected in excise taxes?
Is this tax strategy successful in reducing smoking?

Reference no: EM13189231

Questions Cloud

What is the boundaries of each value : What is the boundaries of each value a. 42.8 Miles b. 1.6 milliliters c. 5.36 ounces d. 18 tones e. 93.8 ounces f. 40 inches

What will happen to the real rental price of capital : Suppose that the Home country in the two-sector (manufacturing and agriculture) specific-factors model has a comparative advantage in agricultural output. What will happen to the real rental price of capital when trade occurs

Write a function that gives the price of a square : At square deals floor covering a popular floor covering sells for $9.00 per square foot . Write a function that gives the price ( P) of a square floo covering that has edge length of (x) feet.

How is information stored into your long-term memory : How is information stored into your long-term memory? How does information stored in your long-term memory affect your critical thinking skills?

Is this tax strategy successful in reducing smoking : Suppose the government places a $15 per carton excise tax on cigarettes in an effort to reduce smoking. Cigarette producers are required to pay this tax out of their revenues. Draw the supply and demand graph based on the original supply and deman..

What is the difference between the sum of the two addends : what is the difference between the sum of the two addends in problem 6 and the estimate of that sum?

How much money can a person afford to borrow : How much money can a person afford to borrow at 8% interest compounded semiannually if the loan is to be repaid at half-year intervals for 10 years with $1000 payments per half-year?

Estimate the annual active use value of the area : Imagine that you are trying to value a particular piece of wilderness that people use for recreational hiking and cycling. While this area has no entrance fee, statistics have been kept on who visits and how frequently they visit the area.

Find the thickness of one coin to the nearest thousandths : there are 312 coins of the same time in two stacks.one stack of coins is 15 inches tall.the other stack is 9 inches tall. find the thickness of one coin to the nearest thousandths of a inch.

User Account

All Pages