Suppose That Smoking Creates a Negative Externality

question 409

Multiple Choice

Suppose that smoking creates a negative externality. If the government does not interfere in the cigarette market, then

• A)the equilibrium quantity of cigarettes smoked will equal the socially optimal quantity of cigarettes smoked.
• B)the equilibrium quantity of cigarettes smoked will be greater than the socially optimal quantity of cigarettes smoked.
• C)the equilibrium quantity of cigarettes smoked will be less than the socially optimal quantity of cigarettes smoked.
• D)There is not enough information to answer the question.