Suppose the government is considering taxing cigarettes. Because it is often politically more popular to tax...

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Suppose the government is considering taxing cigarettes. Because it is often politically more popular to tax the producers of cigarettes than the consumers of cigałettes, the government first considers the impact on the market as a result of taxing the producers of cigarettes. a. Draw the after-tax supply curve if the government chooses to tax cigarette producers $2.50 per pack of cigarettes Instructions: Use the tool provided (S2) to plot the after-tax supply curve. Place your endpoints at Q-0 and Q-100. Market for Cigarettes Price (S) 12.00 11.00 10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 Aher-tax Pc Afer-tax Ps o 10 20 30 40 60 60 TO 80 90 100 110 120

b. Plot the after-tax price paid by consumers and the after-tax price received by sellers. Instructions: Use the tools provided to plot the after-tax price paid by consumers (After-tax Pc) and the after-tax price received by sellers (After-tax Ps). c. Who bears the greater burden of this tax? Click to selecti Now suppose the government considers taxing the consumers of cigarettes instead of the producers of cigarettes. d. Draw the after-tax demand curve if the government chooses to tax cigarette consumers $2.50 per pack of cigarettes. Instructions: Use the tool provided (D2) to plot the after-tax demand curve. Place your endpoints at Q-40 and Q-75.

Market for Cigarettes D2 Price of Cigarettes $ 12.00 $11.00 $10.00 $9.00 $8.00 $7.00 After-tax Pc After-tax Ps $5.00 $4.00 $3.00 $2.00 $1.00 D. 0 10 20 30 40 50 60 70 80 90 100 110 120 Packs of Cigarettes (millions) reset

e. Plot the after-tax price paid by consumers and the after-tax price received by sellers. Instructions: Use the tools provided to plot the after-tax price paid by consumers (After-tax Pc) and the after-tax price received by sellers (After-tax Ps). f Who bears the greater burden of this tax? (Cick to select) g The price sellers receive when the government taxes consumers of cigarettes is Click to select) 9 the price šellers receive wher the the government taxes producers of cigarettes. h. The price buyers pay when the government taxes consumers of cigarettes is (Clickt select) the price buyers pay when the government taxes producers of cigarettes

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Answer 1

Answer #1

Market for Cigarettes Price () 12.00 11.00 10.00 9.00 8.00 7.00 S2 Pc Ps 5.00 4.00 3.00 2.00 1.00 0 10 20 30 40 60 60 70 80 90 100 110 120

b) Price paid by consumer = 8

Price received by seller = 5.50

c) Consumer pay more tax. Tax paid by consumer = 8 - 6 = 2

d)

Market for Cigarettes Price of Cigarettes $12.00 $11.00 $10.00 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 0.00 D2 0 10 20 30 40 50 60 70 80 90 100 110 120 Packs of Cigarettes (millions)

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Answer 2

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