What price also quantity would prevail

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Reference no: EM1323023

Q. Tax A nation which does not presently tax cigarettes is allowing forthe introduction of a $0.40 per pack tax. The economic advisors to the nation estimate the provide also demand curves for cigarettes as:

Qd = 140,000-25,000P
Qs = 20,000+75,000P

where Q= daily trades in packs of cigarettes also P = price per pack. The nation has hired you to provide the subsequent information regarding the cigarette marketplace also the proposed tax:

a) Illustrate what are the equilibrium price also quantity with no tax?

b) Illustrate what price also quantity would prevail after the imposition of the tax? Illustrate what portion of the tax would be borne by buyers also sellers, respectively?

c) Compute the deadweight loss from the tax. Could the tax be justified despite the deadweight loss? Illustrate what tax revenue will be generated?

Reference no: EM1323023

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