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a. Place point A on the initial equilibrium in the market with no government intervention.

a. Place point A on the initial equilibrium in the market with no government intervention.

Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter4: Labor And Financial Markets
Section: Chapter Questions
Problem 33P: What happens to the price and the quantity bought and sold in the cocoa market if counties producing...
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The Centers for Disease Control and Prevention (CDC) estimates that cigarette smoking causes more than 480,000 deaths each year in the United States. Cigarette smoking also carries a significant financial burden, with an estimated $170 billion of direct medical expenses and another $156 billion lost from lower worker productivity annually. Suppose the market demand and supply for cigarettes in the U.S. is represented in the accompanying graph. a. Place point A on the initial equilibrium in the market with no government intervention. Price ($ per pack) 15 14 13 1 2 12 11 10 9 ∞ 7 6 5 4 3 2 1 0 0 40 A Demand Supply 80 120 160 200 240 280 320 360 400 440 480 520 Quantity of cigarettes (billions of packs) b. Suppose the government wants to reduce cigarette consumption to 200 billion packs per year. The government could achieve this by imposing a per-unit tax on cigarettes of per pack.
Transcribed Image Text:The Centers for Disease Control and Prevention (CDC) estimates that cigarette smoking causes more than 480,000 deaths each year in the United States. Cigarette smoking also carries a significant financial burden, with an estimated $170 billion of direct medical expenses and another $156 billion lost from lower worker productivity annually. Suppose the market demand and supply for cigarettes in the U.S. is represented in the accompanying graph. a. Place point A on the initial equilibrium in the market with no government intervention. Price ($ per pack) 15 14 13 1 2 12 11 10 9 ∞ 7 6 5 4 3 2 1 0 0 40 A Demand Supply 80 120 160 200 240 280 320 360 400 440 480 520 Quantity of cigarettes (billions of packs) b. Suppose the government wants to reduce cigarette consumption to 200 billion packs per year. The government could achieve this by imposing a per-unit tax on cigarettes of per pack.
c. Suppose that, instead of a per-unit tax, the government imposes a price control on cigarettes. To achieve its goal, it could per pack or a price floor of impose a price ceiling of per pack. d. Now suppose that, instead of a tax or a price control, the government imposes a quantity restriction, or quota, on producers. Consumers will end up paying per pack as a result.
Transcribed Image Text:c. Suppose that, instead of a per-unit tax, the government imposes a price control on cigarettes. To achieve its goal, it could per pack or a price floor of impose a price ceiling of per pack. d. Now suppose that, instead of a tax or a price control, the government imposes a quantity restriction, or quota, on producers. Consumers will end up paying per pack as a result.
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