If Smokers Are Less Productive in the Workplace and the Law

question 5

Multiple Choice

If smokers are less productive in the workplace and the law were to prohibit differential pay on the basis of smoking behavior,then smoking would:

• A) cause a positive externality.
• B) cause a negative externality.
• C) not cause an externality.
• D) internalize the externality.

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Definitions:

Deadweight Loss

A loss in total societal welfare that occurs when market equilibrium is not achieved or when market imperfections exist, leading to inefficient allocation of resources.

Relatively Inelastic

Describes a situation where the demand for a good or service changes by a smaller percentage than changes in its price.

Deadweight Loss

A situation where inefficiency in the market leads to a loss of total social welfare, typified by a gap between the supply and demand curves.

Relatively Elastic

Describes a situation where the demand or supply for a good or service significantly changes in response to changes in price.