Economic 153 Quiz # 2 Federal and state governments periodically raise excise taxes on cigarettes. Politicians often argue that these tax increases discourage smoking. What other motive is there for raising taxes on cigarettes? Because cigarettes are addictive many smokers will pay higher prices for cigarettes rather than reduce the quantity they purchase. This results in greater revenue from cigarette taxes. Cigarette taxes do no affect as many people as a sales tax or income tax. Therefore, politicians do not face as much opposition to tax increases on these products. Most Illinois farmers can choose to grow soybeans or corn. Which of the variables that influence demand and supply would explain a farmer’s choice? Offer a brief explanation for your answer. Among the factors that influence a farmer’s choice is the expected profitability of the two crops. A farmer will grow corn rather than soybeans if he expects the profits from growing corn will be greater than those earned from growing soybeans. Since corn and soybeans are substitutes in
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This note was uploaded on 04/29/2008 for the course ECO 153 taught by Professor Scahill during the Fall '08 term at Scranton.