1)Government consider four policies: 1 1- A minimum legal price at $35

1)Government consider four policies: 1 1- A minimum legal price at $35. 2- A maximum quantity sold at 25 cigarettes per day. 3- A $4 tax on selling 4- A $2 tax on consumption e. Which policy causes the smallest quantity sold? f. Which policy causes the smallest deadweight loss? g. Which policy is better for consumers in term of consumer surplus? h. Which policy is better for producers in term of producer surplus? i. Which policy causes the highest revenue for the government? j. *Which policy do you suggest?

2)A simple economy has 100 workers and produces only two goods – coffee and doughnuts. Labour is the only factor of production, but some workers are better suited to producing coffee than doughnuts (and vice versa). The table below shows the maximum amount of output of each good possible from various levels of labour input. Number of workers producing coffee Monthly production of coffee (hundreds of pounds) Number of workers producing doughnuts Monthly production of doughnuts (hundreds) 0 0 100 600 25 20 75 550 50 50 50 400 75 75 25 150 100 80 0 0 a) On graph paper, plot the production possibilities frontier for this economy. (2 marks) b) If the economy is currently producing 2000 pounds of coffee (20 hundreds) and 55 000 doughnuts (550 hundreds), what is the opportunity cost of producing another 3000 pounds (30 hundreds) of coffee? (2 marks) c) Can this economy produce 40 000 doughnuts and 4000 pounds of coffee? Explain. (2 marks) d) Can this economy produce 30 000 doughnuts and 6500 pounds of coffee? Explain. (2 marks) e) Suppose that the technology used to produce coffee improves so that the maximum amount of coffee produced from any given amount of labour increases by 10%. Illustrate on graph paper what happens to the production possibilities curve. (2 marks)