The figure below depicts a market for cigarettes. The initial demand curve is D0

Question

The figure below depicts a market for cigarettes. The initial demand curve is D0 and the initial supply curve is S0. The government imposes an excise tax of $6 on every carton of cigarette sold. So S1 is the post-tax supply curve for cigarettes. B is the pre-tax equilibrium and A is the post-tax equilibrium. Answer questions 6 through 9 based on the graph below. At the post-tax equilibrium what amount do sellers charge the consumer and how much of that amount do they get to keep?

Explanation / Answer

c. $23; $17

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