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.

---

Definitions:

Labour

The human effort, whether physical or mental, contributed towards the production of goods or services in an economy.

Capital

Financial assets or resources that individuals or organizations use to fund their operations and invest in their businesses.

New Technology

The latest advancements or innovations in technology that offer improved solutions or efficiency.