A) What are the justifications for government's regulation of tobacco? What are the main tools a government can use to regulate smoking? Motivate your answers making reference to the different models of addictive consumption.

A) What are the justifications for government's regulation of tobacco? What are the main tools a government can use to regulate smoking? Motivate your answers making reference to the different models of addictive consumption.

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 19RQ: What are the three problems that economists have noted with regard to command-and-control...

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Comparative Advantage and Absolute Advantage Analysis

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A) What are the justifications for government's regulation of tobacco? What are the
main tools a government can use to regulate smoking? Motivate your answers
making reference to the different models of addictive consumption.

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a) If the only goal of a regulator of a natural monopoly firm that charges a uniform price is to ensure that the firm produces the socially optimal level of output, and the regulator has the authority to order the firm to do so, explain why this power could not be exercised when the viability of the firm is taken into account. b) Explain why a regulator, whose sole objective is to ensure that a monopoly firm produce the socially optimal output, would have no need to do anything if the firm were a perfectly discriminating monopoly. c) If the market demand curve is common knowledge for a natural monopoly firm and a regulator, but unlike the firm, the regulator has no information about the firm’s cost curves. Explain how a regulator could incentivize the firm to produce the socially optimal output, bearing in mind that the regulator does not even know which level of output is socially optimal?
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