The market for cigarettes in Canada has been the topic of a lot of debate. Let's think about how this market works and how it is affected by government intervention. Suppose the demand and supply curves for cigarettes are the following:

Demand: P = 70 - 0.1Qd Supply: P = 0.2Qs + 10

The price is in dollars and quantity is in millions of cartons per week.

(i) What is the market equilibrium in cigarettes?

(ii) Suppose the government places a $15 per carton excise tax on cigarettes in an effort to reduce smoking. Cigarette producers are required to pay this tax out of their revenues. Draw the supply and demand graph based on the original supply and demand curves, and then show the change caused by this tax. What is the new equilibrium price and quantity?

(iii) There are several implications of this tax program for the various groups in the economy. Let's consider each:

Consumers: How much have prices increased for consumers?
Producers: How much do producers receive per pack AFTER they pay the excise tax?
Government: How much money is collected in excise taxes?
Is this tax strategy successful in reducing smoking?