# Calculate the current excess burden of the tax

8 Suppose that the price elasticity of demand for cigarettes is unity (=1) at all possible quantities. Currently, 30 million packs of cigarettes are sold per year, and the price averages \$2 per pack. Assuming that the price elasticity of supply of cigarettes is 1 and the current tax rate is \$0.40 per pack, calculate the current excess burden of the tax on cigarettes. Suppose the tax per pack is increased to \$0.80 per pack. What will happen to the excess burden of the tax as a result of the tax increase? Under what circumstances can a doubling of the tax on cigarettes actually improve resource use in the country, despite the increase in the excess burden of the tax? (25

Don't use plagiarized sources. Get Your Custom Essay on
Calculate the current excess burden of the tax
Just from \$13/Page
Grab A 14% Discount on This Paper
Pages (550 words)
Approximate price: -
Paper format
• 275 words per page
• 12 pt Arial/Times New Roman
• Double line spacing
• Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Try it now!

Total price:
\$0.00

How it works?