In the Case in Point on Externalities, Irrationality, and Smoking

question 3

Multiple Choice

In the Case in Point on Externalities, Irrationality, and Smoking, economists Gruber and Mullainathan determined that people with a propensity to smoke:

• A) did not act in a manner consistent with bounded willpower or time inconsistency.
• B) had constant utility as excise taxes increased because of perfectly inelastic demand.
• C) would have higher utility as a result of higher excise taxes.
• D) would gain more utility as a result of lower excise taxes.

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Definitions:

Deferred Tax Asset

An accounting term for taxes that have been accrued but not yet paid, potentially reducing future tax obligations.

Impairment Loss

A reduction in the recoverable amount of a fixed asset or goodwill below its carrying amount, recognized as an expense.

Value in Use

The present value of future cash flows expected to be derived from an asset, indicating its utility to the owner.