Question

Suppose that smoking creates a negative externality. If the government does not interfere in the cigarette market, then_________.

Answer 1

Answer: If the government does not interfere in the cigarette market, then "equilibrium quantity of cigarettes smoked will be more than the socially optimal quantity of cigarettes smoked before".

Explanation:

The government interference is important as limits may exceed if cigarette, alcoholic or drug market is not controlled under law. Such actions can maintain a balance and in absence, may also lead to devastation of society.

When the import and export both are regulated by government by marking appropriate taxes and duties under rules and regulations, then people control while investing more in such products. But at the same point when very high duties are tagged then increment of black market start occurring.