Question

QUESTION 10 Smoking has serious adverse consequences for both smokers and those around them. Additionally, smoke butts harm the environment. Type T for True or F for False after every statement: a. If the government is able to estimate the value of the negative externality from smoking, it would be efficient to tax it. b. A tax on cigarette smoking internalises all of the negative externalities associated with smoking. C. Consider the government introduces a tax and in addition, bans smoking in public areas. This banning of smoking in public areas indicates that simply imposing a tax on cigarettes alone does not internalise all the externalities associated with smoking.

Answer 1

a ) Ans: T

b ) Ans: F

c ) Ans: T

Explanation:

From the public welfare point of view negative externalities should be reduced with the help of imposition of tax and other corrective measures taken by the government. Imposition of tax on the product which creates negative externalities will not reduce social costs alone without other corrective measures .