Article Summary
Voters in California approved a $2 per pack tax increase on cigarettes, which went into effect on April 1, 2017. Cigarette taxes are now $2.87 per pack in California, the ninth highest cigarette tax in the country. Approximately one-in-nine adults in California are smokers, and the tax increase is estimated to generate almost $1.4 billion in revenue during the first year, with the revenue designated for the state-run health care plan as well as various state-wide anti-smoking campaigns.
Source: Andrew Blake, "Cigarette tax hike takes effect in California, costs surge by $2 per pack," Washington Times, April 1, 2017.
-Refer to the Article Summary.The additional tax of $2 per pack of cigarettes will have which of the following effects on the market for cigarettes in California?

Question

Article Summary
Voters in California approved a $2 per pack tax increase on cigarettes, which went into effect on April 1, 2017. Cigarette taxes are now $2.87 per pack in California, the ninth highest cigarette tax in the country. Approximately one-in-nine adults in California are smokers, and the tax increase is estimated to generate almost $1.4 billion in revenue during the first year, with the revenue designated for the state-run health care plan as well as various state-wide anti-smoking campaigns.    
Source: Andrew Blake, "Cigarette tax hike takes effect in California, costs surge by $2 per pack," Washington Times, April 1, 2017.
-Refer to the Article Summary.The additional tax of $2 per pack of cigarettes will have which of the following effects on the market for cigarettes in California?

Quizplus · Accepted Answer

The additional tax of $2 per pack of cigarettes will increase the price of cigarettes, leading to a decrease in quantity demanded, and increase the deadweight loss in the market, caused by the inefficiency of the market with the tax. Consumer surplus will decrease while producer surplus may also decrease or remain unchanged depending on the elasticity of demand for cigarettes. Market efficiency would decrease due to the excess burden created by the tax.

Article Summary Voters in California Approved a $2 Per Pack Tax Increase