.Governments often claim that they impose high taxes on cigarettes because smoking is bad for your...

.Governments often claim that they impose high taxes on cigarettes because smoking is bad for your health. They claim that the high taxes are intended to discourage your consumption. Use your understanding of the elasticity of demand to dispute this claim, assuming that cigarettes have a very inelastic demand. Illustrate with a graph. Hint: Very inelastic is not the same as inelastic or perfectly inelastic.

Expert Solution

Rahul Sunny answered 2 years ago

Governments often place so-called sin taxes on goods or services such as cigarettes and alcohol. These...

Governments often place so-called sin taxes on goods or services such as cigarettes and alcohol. These kinds of taxes are popular with politicians because they are usually more palatable to voters than income taxes. To understand the effect of such a tax, consider the monthly market for rum, which is shown on the following graph. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph....

Governments often place so-called sin taxes on goods or services such as cigarettes, alcohol, and pornography.

4. The Laffer curveGovernments often place so-called sin taxes on goods or services such as cigarettes, alcohol, and pornography. These kinds of taxes are popular with politicians because they are usually more palatable to voters than income taxes.To understand the effect of such a tax, consider the monthly market for adult DVDs, which is shown on the following graph.Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make...

Taxation of cigarettes is often justified on the grounds that cigarette smoking creates externalities. What is...

Taxation of cigarettes is often justified on the grounds that cigarette smoking creates externalities. What is meant by the term “externalities” in this context? Give two examples of externalities created by cigarette smoking and explain how a tax on cigarettes could potentially address both of these. Using a fully labelled and explained diagram explain how a tax can increase efficiency in the cigarette market. What size tax should be levied to maximise efficiency in this market? (Indicate the efficient tax...

taxation of cigarettes is often justified on the grounds that cigarette smoking creates externalities. What is...

taxation of cigarettes is often justified on the grounds that cigarette smoking creates externalities. What is meant by the term externalities in this context Give two examples of externalities created by cigarette smoking and explain how a tax on cigarettes could potentially address both of these. Using a fully labelled and explained diagram explain how a tax can increase efficiency in the cigarette market. What size tax should be levied to maximise efficiency in this market? (indicate the efficient tax...

Taxation of cigarettes is often justified on the grounds that cigarette smoking creates externalities. What is...

Taxation of cigarettes is often justified on the grounds that cigarette smoking creates externalities. What is meant by the term “externalities” in this context? Give two examples of externalities created by cigarette smoking and explain how a tax on cigarettes could potentially address both of these. Using a fully labelled and explained diagram explain how a tax can increase efficiency in the cigarette market. What size tax should be believed to maximise efficiency in this market? (Indicate the efficient tax...

Are cigarettes bad for people? Cigarette smoking involves tar, carbon monoxide, and nicotine (measured in milligrams)....

Are cigarettes bad for people? Cigarette smoking involves tar, carbon monoxide, and nicotine (measured in milligrams). The first two are definitely not good for a person's health, and the last ingredient can cause addiction. Brand Tar Nicotine CO Brand Tar Nicotine CO Alpine Benson & Hedges Bull Durham Camel Lights Carlton Chesterfield Golden Lights Kent Kool L&M Lark Lights Marlboro Merit 14.1 16.0 29.8 8.0 4.1 15.0 8.8 12.4 16.6 14.9 13.7 15.1 7.8 0.86 1.06 2.03 0.67 0.40 1.04...

It is frequently asserted that taxes on cigarettes beer are regressive, because poor individuals spend a...

It is frequently asserted that taxes on cigarettes beer are regressive, because poor individuals spend a larger fraction of their income on such items than do better-off individuals. How would your estimate of the degree of regressivity be affected if you thought these commodities were produced by?: a. Competitive industries with inelastic supply schedules? b. Monopoly with a linear demand schedule? c. Monopoly facing a constant elasticity demand schedule?

1. One reason governments impose taxes is to: a. spur economic growth b. raise government revenues...

1. One reason governments impose taxes is to: a. spur economic growth b. raise government revenues c. encourage more production d. increase consumer spending 2. One cost associated with the imposition of taxes is: a. shortages b. overconsumption c. scarcity d. deadweight loss 3. The total amount of surplus lost due to taxation is: a. less than the amount of revenue generated b. greater than the amount of revenue generated c. used to fund public services d. transferred to the...

In a restaurant that allows smoking, your consumption of cigarettes may have a negative effect on...

In a restaurant that allows smoking, your consumption of cigarettes may have a negative effect on my enjoyment of a restaurant meal. Yet you do not in any way pay for this negative effect on me. a. (5 points) From this information, decide on the type of externality your consumption creates in the market for cigarettes. Explain in detail, using words and an appropriate graph, the nature of the externality. b. (5 points) In your graph denote the magnitude of...

Tax low to get high: Should governments should weed taxes down? And why

Question

.Governments often claim that they impose high taxes on cigarettes because smoking is bad for your...

Solutions

Expert Solution

Related Solutions

Governments often place so-called sin taxes on goods or services such as cigarettes and alcohol. These...

Governments often place so-called sin taxes on goods or services such as cigarettes, alcohol, and pornography.

Taxation of cigarettes is often justified on the grounds that cigarette smoking creates externalities. What is...

taxation of cigarettes is often justified on the grounds that cigarette smoking creates externalities. What is...

Taxation of cigarettes is often justified on the grounds that cigarette smoking creates externalities. What is...

Are cigarettes bad for people? Cigarette smoking involves tar, carbon monoxide, and nicotine (measured in milligrams)....

It is frequently asserted that taxes on cigarettes beer are regressive, because poor individuals spend a...

1. One reason governments impose taxes is to: a. spur economic growth b. raise government revenues...

In a restaurant that allows smoking, your consumption of cigarettes may have a negative effect on...

Tax low to get high: Should governments should weed taxes down? And why