A consumer derives utility for "all other goods," g,and cigarettes,s.The price of "all other goods" equals $9 and the price of cigarettes is $10.Now suppose the government implements a $0.50 per-unit tax on cigarettes to encourage a decrease in smoking.How does the tax affect the marginal rate of transformation,MRT?
A) The MRT will decrease to - .
B) The MRT will increase to - .
C) The MRT will increase to - + 0.05.
D) The MRT will decrease to - - 0.05.

Question

A consumer derives utility for "all other goods," g,and cigarettes,s.The price of "all other goods" equals $9 and the price of cigarettes is $10.Now suppose the government implements a $0.50 per-unit tax on cigarettes to encourage a decrease in smoking.How does the tax affect the marginal rate of transformation,MRT?
A) The MRT will decrease to - . 
B) The MRT will increase to - . 
C) The MRT will increase to - + 0.05. 
D) The MRT will decrease to - - 0.05.

Quizplus · Accepted Answer

The Answer of A consumer derives utility for "all other goods," g,and cigarettes,s.The price of "all other goods" equals $9 and the price of cigarettes is $10.Now suppose the government implements a $0.50 per-unit tax on cigarettes to encourage a decrease in smoking.How does the tax affect the marginal rate of transformation,MRT?
A) The MRT will decrease to - . 
B) The MRT will increase to - . 
C) The MRT will increase to - + 0.05. 
D) The MRT will decrease to - - 0.05.

A Consumer Derives Utility for "All Other Goods," G,and Cigarettes,s