Socially optimal quantity of cigarettes

Assignment Help Business Economics

Reference no: EM131163768

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 (efficient) 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 this question.

Reference no: EM131163768

Questions Cloud

Statistical demand equations for estimating consumer demand : What warnings would you give forecasters in using statistical demand equations for estimating consumer demand? How can the problems associated with using static equations in a dynamic world best be dealt with? Elaborate.

Consider the competitive market for natural gas : Consider the competitive market for natural gas. Now suppose that the price of renewable energy (a substitute for natural gas) decreases because of a technological advance. Answer the following questions about the natural gas market.

Pollution permit market for carbon emissions : The state of California has a pollution permit market for carbon emissions, where all large firms must have a permit for each ton of carbon emissions they generate. The California state government sets the supply of permits and large electricity prod..

What is the drills angular acceleration : A high-speed drill reaches 2500 rpm in 0.60 s. What is the drill's angular acceleration? Through how many revolutions does it turn during this first 0.60s?

Socially optimal quantity of cigarettes : 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 opti..

Monopoly computer chip maker increases production : Suppose that a monopoly computer chip maker increases production from 10 microchips to 11 microchips. If the market price declines from $30 per unit to $29 per unit, marginal revenue for the eleventh unit is?

Direction of demand shift and relative elasticity of supply : For each of the following assume that the demand curve shifts while the supply curve remains constant. What is the direction of the demand shift and relative elasticity of supply? Prices do not change. Quantity increases significantly. Price falls si..

In private company accounting system : In a private company’s accounting system, inputs are _______________ and outputs are _________.

Determine if the company should invest in project : A project requires an initial investment of $50,000. The annual expenses are estimated to be $10,000 for the first year and decrease 5% per year over the 5 year life of the project. The annual revenues are estimated to be $15,000 for the first year a..

User Account

All Pages