Suppose the market for cigare

timer Asked: Dec 18th, 2015

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 Suppose the market for cigarettes is characterized by the following information: Qd = 70 – 5P [Demand] Qs = 3P – 10 [Supply] [Note: P = price per unit; Qd = thousands of units demanded; Qs = thousands of units supplied] Suppose the government imposes a sales tax of $2 per unit. Answer questions (i) through (v) below: i) Calculate the magnitude of the consumer surplus and producer surplus in the pre-tax equilibrium. ii) Calculate the tax revenue in the post-tax equilibrium. iii) Calculate the change in consumer surplus due to the sales tax. iv) Calculate the change in producer surplus due to the sales tax. v) Calculate the Dead-Weight-Loss due to the sales tax. 

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