Public Economics and taxation

Jan 28th, 2015
RockCafe
Category:
Economics
Price: $10 USD

Question description

Governor Jerry Brown is about to propose his an initiative to pay for losses sustained in the Southern California wild fires by imposing a cigarette tax on all cigarette sales in the State of California. Specifically, he asks you to estimate the annual deadweight loss of the tax. You are told the following: the tax is 25 cents a pack; the uncompensated elasticity of demand for cigarettes is -0.5; the elasticity of supply of cigarettes is 0.75; and, in the absence of this tax, the price of cigarettes is $5.89 a pack and 2.6 billion packs are sold annually.

 a.  Calculate and report an estimate of the annual deadweight loss of the tax. 

b. Is your estimate an accurate measure? Why or why not? If you believe it to be inaccurate, is it an underestimate or an overestimate of the true excess burden? Be sure to buttress your answers with economic reasoning.

Tutor Answer

(Top Tutor) Daniel C.
(997)
School: UT Austin
PREMIUM TUTOR

Studypool has helped 1,244,100 students

3 Reviews


Summary
Quality
Communication
On Time
Value
BlueOcean
Nov 17th, 2016
" Awesome! Exactly what I wanted. "
ashleyisgod
Oct 25th, 2016
" Top quality work from this guy! I'll be back! "
Molly_Moon
Oct 3rd, 2016
" AMAZING as always! "
Ask your homework questions. Receive quality answers!

Type your question here (or upload an image)

1831 tutors are online

Brown University





1271 Tutors

California Institute of Technology




2131 Tutors

Carnegie Mellon University




982 Tutors

Columbia University





1256 Tutors

Dartmouth University





2113 Tutors

Emory University





2279 Tutors

Harvard University





599 Tutors

Massachusetts Institute of Technology



2319 Tutors

New York University





1645 Tutors

Notre Dam University





1911 Tutors

Oklahoma University





2122 Tutors

Pennsylvania State University





932 Tutors

Princeton University





1211 Tutors

Stanford University





983 Tutors

University of California





1282 Tutors

Oxford University





123 Tutors

Yale University





2325 Tutors