Excise taxes on cigarettes vary widely by state, from 17 cents

Excise taxes on cigarettes vary widely by state, from 17 cents a pack in Missouri to $4.35 a pack in New York. (See http:llwww.taxadmin.org/fta/rate/cigarette.pdf for a list of excise taxes for all states.) Federal law allows Indian reservations to sell cigarettes to tribal members without paying state excise taxes, and because the U.S.

Supreme Court ruled that states do not have the authority to enter reservations to collect taxes, many tribal smoke shops do not charge excise taxes to non-tribal members as well. In the state of New York, a pack of name-brand cigarettes sells for about $10, and a pack of generic cigarettes sells for about $8. These prices include the state excise tax of $4.35 per pack. Assume that the marginal utility for the last pack of name-brand cigarettes consumed is equal to 7 and the marginal utility for the last pack of generic cigarettes consumed is equal to 3. The marginal utility per dollar for name-brand cigarettes at tribal smoke shops is D, while the marginal utility per dollar for generic cigarettes at tribal smoke shops is . Round your response to the nearest two decimal places.

Here’s the SOLUTION

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