Consider a mid-sized suburban locale where the market for modified electronic cigarettes, mod e-cigs, is described by the following demand and supply equations:Q_D= 448- 3.5P, andQ_s= 2.5P- 80whereQ_DandQ_sare the quantity of mod e-cig demanded and supplied respectively, per month.Pis the price (in dollars) for one mod e-cig.Currently, there is no government intervention or any external factors.

1.Given the current market environment, what is the current market price and the quantity of mod e-cigs traded?(4points)

Given the current market environment, the current market price is $_____and the current market quantity traded is_______mod e-cigs per month.

2.At the current market price, what is the value of consumers' surplus?( 4 points)

At the current market price, the consumer surplus is $____________.

Concerned about the appeal of mod e-cigs among teenagers and the potential long lasting health problems they may incur from using these devices, the local government decides to implement an excise tax of $9.60 per unit of mod e-cig traded.After its implementation, with no additional external factors, the market adjusts.

3.Given the implementation of the excise tax and the market adjustments, what is the new market outcome?(8 points)

Complete the sentence by entering one of the following phrases or a numerical value (0.00 is acceptable) in the blank space provided:

in the first blank space: a numerical value

in the second and third blank spaces:sellers receive|buyers pay

in the fourth and fifth blank spaces: a numerical value

With the implementation of the excise tax, the new market price is $_______and this is the price _______.The price________is $______and the new market quantity traded is _________.

4.Given the implementation of the excise tax, what is the government revenue (tax revenue)?(3 points)

With the implementation of the excise tax, the government revenue is $_______.

5.Given the implementation of the excise tax, what can you say about the burden of the tax(8 points)

Complete the sentence by entering one of the following phrases or a numerical value (0.00 is acceptable) in the blank space provided:

in the first and second blank spaces:do|do not

in the third and fourth blank spaces: a numerical value

in the fifth blank space:just as|more|less

Consumers_________, and producers______face a tax burden.Specifically, consumers tax burden per unit is $_______while producers' tax burden is $_______.This implies that, compared to producers, consumers are_________responsive to price changes.

6.What can you say about the market outcome?(6 points)

Complete the sentence by entering one of the following phrases or a numerical value (0.00 is acceptable) in the blank space provided:

in the first blank space:is|is not

in the second blank space:efficiency|inefficiency

in the third blank space: a numerical value

The market outcome______efficient and a measure of its _______is $______.

7.Given the implementation of the excise tax, what can you say about consumer surplus?(5 points)

Complete the sentence by entering one of the following phrases or a numerical value (0.00 is acceptable) in the blank space provided:

in the first blank space:increases to|remains the same at|decreases to

in the second blank space: a numerical value

As a result of the excise tax, consumers surplus________$________.