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Applying the theory: 3. ** Comparing price floor and tax: The government is considering a floor price on cigarettes, in a bid to reduce consumption.
Applying the theory: 3. ** Comparing price floor and tax: The government is considering a floor price on cigarettes, in a bid to reduce consumption. a. With the help of a diagram, outline the changes in consumer and producer surplus as a result of this price floor. Is this market efficient? b. Compare and contrast the effects of this price floor, versus if the government decided to impose a tax instead [assume the new quantities traded would be the same under either scenario]
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