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Cigarette smoking imposes many external costs on society: secondhand smoke, the litter on the street from discarded butts, and so on. Therefore, the market equilibrium
Cigarette smoking imposes many external costs on society: secondhand smoke, the litter on the street from discarded butts, and so on. Therefore, the market equilibrium quantity of cigarettes is not equal to the socially optimal quantity. The following graph shows the demand for cigarettes (their marginal private benefits), the supply of cigarettes (the marginal private costs of producing them), and the marginal social costs of cigarettes, including both the marginal private costs and external costs. Which of the following policies could help the government achieve the efficient outcome? Check all that apply. Offer a subsidy to producers equal to the vertical distance between the marginal private benefits curve and marginal social benefits curve Offer a subsidy to consumers equal to the vertical distance between the marginal private benefits curve and the marginal social benefits curve Offer a subsidy equal to the price at the efficient outcome Introduce emission taxes Implement tradable pollution permits
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