Suppose that smoking creates a negative externality.If the government imposes a per-cigarette tax equal to the per-cigarette externality,then
A)the equilibrium quantity of cigarettes smoked will be less than 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 equal the socially optimal quantity of cigarettes smoked.
D)There is not enough information to answer the question.

Question

Quizplus · Accepted Answer

When the government imposes a tax equal to the externality, it internalizes the external cost, aligning the private cost with the social cost, thus achieving the socially optimal quantity.

Suppose That Smoking Creates a Negative Externality