# HW_ch6 - (c Calculate the amount of lost consumer surplus...

This preview shows page 1. Sign up to view the full content.

Homework Question for Chapter 6 1. Given the the demand curve for cigarettes is Q D = 1500 - 6P and the supply curve is Q S = -100 + 2P and government has decided it would like to reduce the total amount of cigarette sales. Answer the following questions. (a) Graph the supply and demand curves in the absence of taxes, calculate and demonstrate the equilibrium levels of price and output. (b) Impose a tax of \$24 on either supply or demand. Graph the new supply or demand curve that occurs in the presence of the tax. Calculate the new price received by ﬁrms, price paid by consumers and the equilibrium quantity of output in the presence of the tax. Demonstrate each of these points on graph.
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: (c) Calculate the amount of lost consumer surplus, lost producer surplus. Calculate the amount of the dead-weight loss. (d) What would be the quantity sold if instead of a tax the government imposed a price ﬂoor of \$206? Does this minimum price actually reduce the amount of cigarettes sold on the market? What is the lowest minimum price government could impose that would impact the market? (e) Calculate the amount of lost consumer surplus, change to the producer surplus. Calculate the amount of the dead-weight loss. (f) You’re an advisor for the Governor. What policy instrument would you recom-mend she use to reduce smoking? (Taxes or minimum price) Why?...
View Full Document

## This note was uploaded on 10/14/2010 for the course DDF 1124-445 taught by Professor Gorthermclays during the Spring '10 term at Florida College.

Ask a homework question - tutors are online