5. Smoking produces a negative externality because it imposes a health risk on others who inhale second-hand smoke.

Cigarette smoking also causes productivity losses to the economy due to the shorter expected life span of a smoker.

The U.S. Centers for Disease Control (CDC) has estimated the average social cost of smoking a single pack of cigarettes for different states by taking these negative externalities into account. The accompanying table provides the price of cigarettes and the estimated average social cost of smoking in five states.