Use the following graph of the market for cigarettes to answer the questions.

a. If the government imposes a 10-cent-per-pack tax on cigarettes, will the price consumers pay rise more if the demand curve is D1 or if the demand curve is D2? Briefly explain.
b. If the government imposes a 10-cent-per-pack tax on cigarettes, will the revenue the government collects be greater if the demand curve is D1 or if the demand curve is D2? Briefly explain.
c. If the government imposes a 10-cent-per-pack tax on cigarettes, will the excess burden from the tax be greater if the demand curve is D1 or if the demand curve is D2? Briefly explain.

Transcribed Image Text:

Price (dollars per pack) $4.50 D1 D2 Quantity (billions of packs) 20