Refer to above figure. In the absence of trade, what is the country's producer surplus?

In the above figure, the monopolistically competitive firm produces

A) Q3 and sets the price at P3. B) Q2 and sets the price at P2. C) Q1 and sets the price at P1. D) Q1 and sets the price at P5.

If lower-income households spend a greater share of their income on cigarettes than do higher-income households, then a tax that raises the price of cigarettes will

A) cause lower-income households to incur a greater loss of consumer surplus than that incurred by higher-income households. B) cause higher-income households to incur a greater loss of consumer surplus than that incurred by lower-income households. C) raise consumer surplus among higher-income households. D) cause consumer surplus to decline among smokers, but the relative impact cannot be determined from the given information.