9. (4 pts. a solution to a problem similar to this has been posted to D2L). Suppose the market for cigarettes is perfect

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9 4 Pts A Solution To A Problem Similar To This Has Been Posted To D2l Suppose The Market For Cigarettes Is Perfect 1 (95.27 KiB) Viewed 10 times

9. (4 pts. a solution to a problem similar to this has been posted to D2L). Suppose the market for cigarettes is perfectly competitive and has the following demand per pack: Qp = 6000 - 600P and the PMC (private MC) per pack is $3. Further suppose that each pack of cigarettes imposes an external cost to society (say due to secondhand health effects) of $2. a. Draw the demand, market supply (=PMC), and the SMC per pack of cigarettes. What is the market equilibrium price and quantity? b. Illustrate and calculate the deadweight loss (DWL) in this market. c. Propose a specific policy to eliminate the DWL and briefly justify your proposal.