The graph below illustrates a market for cigarettes. Price of cigarettes $10 $8 $7 1 1 Marginal social cost Marginal private cost 120 180 Demand Quantity of cigarettes (millions of packs) A. Does the graph suggest that there are positive or negative externalities associated with cigarettes? B. Find the equilibrium price and quantity. C. What is the socially optimal quantity? D. According to the graph, what is the marginal external cost of a pack of cigarettes?

The graph below illustrates a market for cigarettes. Price of cigarettes $10 $8 $7 1 1 Marginal social cost Marginal private cost 120 180 Demand Quantity of cigarettes (millions of packs) A. Does the graph suggest that there are positive or negative externalities associated with cigarettes? B. Find the equilibrium price and quantity. C. What is the socially optimal quantity? D. According to the graph, what is the marginal external cost of a pack of cigarettes?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter12: Environmental Protection And Negative Externalities

Section: Chapter Questions

Problem 40P: Show the market for cigarettes in equilibrium, assuming that there are no laws banning smoking in...

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