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Resources Q Hint Score 0% 10 Taxes - End of Chapter Problem In the United States, each state government can impose its own excise tax on the sale of cigarettes. Suppose that in the state of North Texarkana, the state government imposes a tax of $2.00 per pack sold within the state. In contrast, the neighboring state of South Texarkana imposes no excise tax on cigarettes. Assume that in both states the pre-tax price of a pack of cigarettes is $2.00. Assume that the total cost to a resident of North Texarkana to smuggle a pack of cigarettes from South Texarkana is $3.50 per pack. (This includes the cost of time, gasoline, and so on.) Assume that the tax is levied on the supplier. a. In the accompanying graph, move the "Supply + Tax" line to depict the supply curve in the market for cigarettes Market for Cigarettes- North Texarkana Supply + Tax in North Texana after the tax is levied. 35 Supply 3,0 25 Price of Cigarettes 20 1.5 1.0 Demand 05 0 1 2 3 4 5 6 8 9 10 Packs of Cigarettes (in thousands) b. Does it make sense to for someone to smuggle a pack of cigarettes from South Texarkana to North Texarkana? - , because the new equilibrium price in North Texarkana is than the total cost of smuggling a pack from South Texarkana. hp