2- Suppose the price elasticity of demand for cigarettes is 0.4. Assume consumers buy 70 million packs of cigarettes per

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2- Suppose the price elasticity of demand for cigarettes is 0.4.Assume consumers buy 70 million packs of cigarettes per month at aprice of $5 per pack. If a $2 tax is added to that price,
a. What is the percentage change in price? Hint: Use the part ofthe elasticity formula that applies. [ Select ] ["33.33", "50.00","3.00", ""] %
b. Given that the price elasticity of cigarettes is 0.4, howmuch will cigarette consumption decline because of the tax? [Select ] ["13.33", "20.00", "120.00"] %
c. If the government mistakenly assumed the price elasticity ofcigarettes to be 1, how much would cigarette consumption declinebecause of the tax? [ Select ] ["13.33", "33.33", "50.00"] %