2. Refer to Figure below and answer the following questions. The figure plots the domestic market…

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2. Refer to Figure below and answer the following questions. The figure plots the domestic market…

2. Refer to Figure below and answer the following questions. The figure plots the domestic market demand and supply for cigarette. Assume that the size of external damage/cost per unit consumption of cigarette is estimated to be 3 dollars. 1P 10 20 30 40 50 60 70 80 90 100 110 120 2 (a) What is the equilibrium price (without any interventions)? Calculate the consumer surplus, the producer surplus, and the total surplus. (b) Find the socially optimal quantity. (c) What is a price ceiling that achieves the social optimum in (b)? Cal- culate the consumer surplus, the producer surplus, and the total surplus.
(d) What is a price floor that achieves the social optimum in (b)? Cal- culate the consumer surplus, the producer surplus, and the total surplus. (e) What is a corrective tax that achieves the social optimum in (b)? Calculate the consumer surplus, the producer surplus, and the total surplus.
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