Suppose That Cigarette Smokers Create a Negative Externality

question 6

Multiple Choice

Suppose that cigarette smokers create a negative externality. Further suppose that the government imposes a tax on cigarettes equal to the per-unit externality. What is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of cigarettes?

• A)They are equal.
• B)The after-tax equilibrium quantity is greater than the socially optimal quantity.
• C)The after-tax equilibrium quantity is less than the socially optimal quantity.
• D)There is not enough information to answer the question.

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Definitions:

Mainstream Economics

This term describes the body of economic thought considered dominant in the academic discipline; it focuses on the use of mathematical models to describe economic processes.

Social Movement Unionism

A labor union strategy that combines traditional union organizing with broader social and political activism, often aligning with various social movements.

New Public Management

An approach to running public sector organizations that is inspired by private sector management techniques, focusing on efficiency, performance measurement, and the use of market mechanisms.

Undue Emphasis

Placing an excessive or disproportionate level of importance on a particular aspect, often leading to imbalance or distortion.