The Constant Elasticity of Demand for Cigarettes Has Been Estimated

question 1

Multiple Choice

The constant elasticity of demand for cigarettes has been estimated to be 0.5.To reduce smoking by 75%, approximately how much tax needs to be added to a $1 pack?

• A)$.38.
• B)$.75.
• C)$1.50.
• D)$2.25.
• E)$4.

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Definitions:

Indorsement

The act of signing the back of a negotiable financial instrument, thereby making it payable to someone other than the named holder.

Signature

A person's name written in a distinctive way as a form of identification in authorizing a document.

Check

A written, dated, and signed instrument that directs a bank to pay a specific sum of money to the bearer or a designated entity from the drawer's account.

Order Paper

A negotiable instrument that is payable to a specific person or their order, requiring endorsement for transfer.