A local government imposed a specific excise tax on each unit of a good, e.g., a pack of cigarettes, sold within the locality. Prior to the imposition of the tax the (competitive) market prices was $3.00 per pack and 900,000 packs of cigarettes were being sold each quarter.

An excise tax of $1.50/pack is imposed on the sale of cigarettes. After the tax had taken effect 850,000 packs were being sold in this competitive market. The new, inclusive-of-tax market price stabilized at $4.25 per pack.

What was the amount of revenue the government received from the tax in a quarter?

What was the loss in consumer surplus associated with the tax?

What (if any) was the loss in producer surplus associated with the tax?

What was the Dead Weight Loss associated with the tax?

What is your estimate of the price elasticity of demand for this taxed product?