Let the market for cigarettes be characterized by the following information:
Qd = 70 – 5P [Demand]
Qs = 3P – 10 [Supply]
Suppose the government imposes a sales tax of $2 per unit. Answer questions.
1) Calculate the magnitude of the consumer surplus and producer surplus in the pre- tax equilibrium.
2) Calculate the tax revenue in the post-tax equilibrium.
3) Calculate the change in consumer surplus due to the sales tax.
4) Calculate the change in producer surplus due to the sales tax.
5) Calculate the Dead-Weight-Loss due to the sales tax.