Article Summary
Among a package of anti-smoking bills designed to lower California's health care costs by reducing the use of tobacco products is a bill sponsored by Dr.Richard Pan that would increase the tax on a pack of cigarettes by $2.California currently has a tobacco tax of 87-cents-per-pack,making California's tax 33rd in the nation and well below the New York state tax of $4.35 a pack.The state taxes are in addition to a $1.01 federal tax on cigarettes.The bill stipulates that the revenue collected must be used to increase the number of physicians in California as well as support existing health care programs managed by the state.A Field Poll taken one day following the announcement of the bill found that two-thirds of California voters support the increase in the cigarette tax.
-Refer to the Article Summary.The additional tax of $2 per pack of cigarettes being proposed by Senator Pan would have which of the following effects on the market for cigarettes in California?

Question

Quizplus · Accepted Answer

An increase in the tax on cigarettes will raise the price and reduce the quantity demanded, leading to a decrease in consumer surplus and producer surplus as well as an increase in deadweight loss. Therefore, the best choice is C.

Article Summary Among a Package of Anti-Smoking Bills Designed to Lower California's