What should be the size of the tax per pact of cigarettes

Reference no: EM13190744

Studies indicate that the price elasticity of demand for cigarettes is about 0.4. If a pack of cigarettes currently costs $5 and the government wants to put a tax on it to reduce smoking by 20%, what should be the size of the tax per pact of cigarettes? Use the midpoint method.

Reference no: EM13190744

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