Answer to Question #248822 in Microeconomics for shine

Question

The U.S. government administers two programs

that affect the market for cigarettes.

Media campaigns and labeling requirements

are aimed at making the public aware of the

dangers of cigarette smoking. At the same

time, the Department of Agriculture maintains

a price-support program for tobacco farmers,

which raises the price of tobacco above the

equilibrium price.

a. How do these two programs affect cigarette

consumption? Use a graph of the cigarette

market in your answer.

b. What is the combined effect of these two

programs on the price of cigarettes?

c. Cigarettes are also heavily taxed. What effect

does this tax have on cigarette consumption?

Answer 1

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