Answered: Why are taxes, one traditional remedy…

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter30: Market Failure: Externalities, Public Goods, And Asymmetric Information

Section: Chapter Questions

Problem 10QP

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Question

Why are taxes, one traditional remedy for negative externalities, less than ideal for smoking cessation in the United States?

Nicotine is addictive/demand is inelastic, and smokers are mostly poor, so in effect cigarette taxes reduce the quality of life of people we’re trying to help without substantially reducing smoking

Demand is inelastic, and smokers are mostly rich, so they don’t reduce smoking as a result of taxes

Demand is elastic, and smokers are mostly old, so taxes reduce smoking but cause increased anxiety among the elderly

Demand is elastic, and smokers are mostly young, so they quit smoking but are then more likely to experiment with illegal drugs

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