Cigarette excise tax varies widely across states. For example, state cigarette tax is $1.36 in Indiana, $0.44 in North Dakota, and $4.35 in New York. Sometimes local excise taxes are added to the state taxes, so in NYC with $1.50 per pack local tax added, the total tax per pack amounts to $5.85. (The highest such combined state-local tax rate is found in Chicago, IL at $7.16 per pack.) expatistan.com reports a price of $14 per (Marlboro) package in NYC (as of Nov/9/2021). Assume this price includes the combined state-local tax of $5.85. Assume the demand for cigarettes in NYC is given by = 17.8 0.2 and supply is given by = 2 1.3. (Price is measured in USD, quantity in millions of packs per month.)

a. If cigarettes production (the supply curve) looks the same everywhere, what do you think the lower excise cigarettes tax in some states suggests about the elasticity of demand?

b. Assuming there are no negative externalities to smoking, what would be the perfectly competitive amount consumed and the price in equilibrium, without the tax?

c. What is the currently consumed quantity and price (for consumers, and for producers) with the current tax of $5.85? What are the government tax revenues, and what is the cause of DWL?