Problem 4.2. In a world without cigarette taxes, Cedar Rapids, Iowa becomes the first place to tax cigarettes. The government of Cedar Rapids taxes sellers of cigarettes $2 per pack. The supply of cigarettes to Cedar Rapids is perfectly elastic since Cedar Rapids doesn't make cigarettes (and it's a tiny part of the huge cigarette market). P [S/pack) (b) The tax reduces smoking in Cedar Rapids by thousand packs per day. 8 (c) In the tax equilibrium, smokers in Cedar Rapids pay $ per pack, which is more than without the tax. Circle this tax-inclusive Supply price on the vertical axis. (d) In the tax equilibrium, sellers keep per Demand pack, which is $ less than without the tax. Circle this price on the vertical axis. 0 2 3 5 6 7 8 Smokes (ths. packs/day) (e) The government of Cedar Rapids collects (a) Illustrate how this $2 tax affects the demand for per day in revenue from the cigarette or supply of cigarettes. Mark the new equilibrium tax. Illustrate the tax revenue in the graph. point with Et