Assume the supply curve for cigars is a typical, upward-sloping straight line, and the demand curve for cigars is a typical, downward sloping straight line. Suppose the equilibrium quantity in the market for cigars is $1000$ per month when there is no tax. Then a tax of $ \$0.5$ per cigar is imposed. The effective price paid by buyers increases from $ \$1.5$ to $ \$1.9$ and the effective price received by sellers falls from $ \$1.5$ to $ \$1.4$. The government's tax revenue amounts to $ \$475$ per month. Which of the following statements is correct?

Given,

Equilibrium quantity of cigars is $1000$ per month.

Tax imposed per cigar is $ \$0.5$

Govt. tax revenue = $ \$475$

Equilibrium quantity of cigars is $1000$ per month.

Tax imposed per cigar is $ \$0.5$

Govt. tax revenue = $ \$475$

Let $y$ be the equilibrium quantity of cigar after tax.

We also know, Tax revenue of govt. is tax rate times the quantity taxed.

$$\implies Tax \ Revenue=0.5 \times y \\ \implies 475=0.5 \times y \\ \therefore y=475 \times 2 \\ =950$$

#### Dead-Weight Loss (DWL)

Dead-weight Loss is given by the area of the triangle $ABC$,

$$DWL=\frac{1}{2} \times Base \times Height \\ = \frac{1}{2} \times (1000 - 950) \times (0.5) \\ = \$ 12.5$$