9. (50) The Food and Drug Administration has, for some time, been evaluating whether or not to apply the rules that govern drug manufacture to the manufacture of the liquids used in electronic cigarettes. At the same time, there is legislation that may impose taxes upon the sale of such liquids. The argument put forward for these policies is that they will improve public health. Your task is first, to diagram this market, being as specific as possible (i.e. including numbers if possible). Second you should assess the impact of a tax on e-liquids upon well being in Billings (again, providing a dollar value of increase or decrease in well being and social cooperation if possible) and upon the incidence of the smoking of regular cigarettes. Next, include an assessment of the likely impact of this policy (in the long run) upon lung cancer rates in Billings. Fourth, calculate the current price elasticity of demand before and after the tax is imposed. Finally, provide your assessment as to whether, from the perspective of society in Billings, the FDA should regulate and/or tax the sale of e-liquids. Some information that may or may not be useful: a. The current number of bottles of liquid sold in Billings each year is 250,000. b. E-cigarettes contain no carcinogens (cancer causing compounds). Regular cigarettes are full of these compounds. c. It costs (in economic terms) e-liquid manufacturers the same amount to make a bottle of liquid regardless of how many bottles they make. This amount is $20. d. E-cigarettes draw power from a rechargeable battery to power a coil that vaporizes the liquid. The temperature of the resulting vapor is about the same temperature as the smoke from regular cigarettes. e. The revenue that a $5 per bottle tax on e-liquids would raise in Billings is $500,000.