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Consider the following public policies in the market for cigarette smoking: an aggressive anti-smoking media campaign and a Department of Agriculture program limiting the land to grow tobacco. Both policies are implemented at the same time.
a. Draw a demand and supply graph and show the effect of both policies on the cigarette market, starting from an initial equilibrium. Explain the market effect of each policy.
b. Are the policies effective in reducing cigarette smoking? Why?
c. What happened to the price of cigarettes after the policies went into effect? Why?
Draw a graph of the aggregate labor market in equilibrium. Then consider each of the following scenarios. In each case, show the effect on the market and explain what will happen to the real wage and the equilibrium quantity of labor.
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