Final answer:
The equilibrium quantity of cigarettes decreases by 210 million cartons after implementing a $3 tax per carton, calculated based on the $630 million revenue generated from the tax.
Step-by-step explanation:
The student's question asks about the effect of a $3 tax on each carton of cigarettes, with a specific focus on the decrease in equilibrium quantity resulting from the tax. Given the information that the tax raises $630 million in revenue and causes an $900 million loss of consumer and producer surplus in the cigarette market, we can determine the change in equilibrium quantity.
If the tax per carton is $3, and the total tax revenue is $630 million, we can divide the total revenue by the tax rate to find the change in equilibrium quantity. This calculation is: $630 million / $3 = 210 million cartons. Therefore, the equilibrium quantity of cigarettes decreases by 210 million cartons. The correct answer to the student's question is a. 210 million.
The $3 tax on each carton of cigarettes sold is designed to discourage smokers from buying cigarettes and encourage them to quit smoking. This tax raises $630 million in revenue, but it also causes a loss of $900 million in consumer and producer surplus in the market for cigarettes. From this information, we can determine that the equilibrium quantity of cigarettes decreases by 210 million.