The Price Elasticity of Demand for Cigarettes Is 0

question 465

Multiple Choice

The price elasticity of demand for cigarettes is 0.4. If government wants to reduce smoking by 10 percent, by how much should it raise the price of cigarettes by imposing a tax?

• A) by 10 percent
• B) by 20 percent
• C) by 25 percent
• D) by 50 percent

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Definitions:

Economic Profit

The difference between total monetary revenue and total costs, including both explicit and implicit costs.

Regulatory Agency

A government body responsible for enforcing laws and regulations to protect public interest in specific sectors, such as healthcare, finance, and the environment.

Profit Maximized

The point at which a company achieves its highest level of profit through the optimal balance of cost and revenue.

Charging Price

The act of setting a specific price for a product or service offered to consumers.