1.4 In the discussion on rationales for intervention in markets, we note that Manning found external costs of $0.33 per pack of cigarettes.

a Draw a supply and demand diagram, and graph Manning’s external costs of $0.33 (in 1995 dollars) based on a market price of $1.50 (in 1995 dollars) per pack.

b If a tax of $0.33 were imposed, what would happen to the market price, and to the equilibrium quantity?