Exercise 3. 2. Cigarette smoking imposes costs on non-smokers. The following functions show the effect of cigarette smoking on resource allocation: MPB = 10-Q MSB =6-Q MPC = MSC = Q 1. Is the externality from the demand side or supply side? Briefly explain. [5] 2. Draw benefit and cost curves. Calculate to find two equilibrium quantities of cigarettes. [10] 3. Which quantity of cigarettes is inefficient from a societal perspective? Which quantity of cigarettes is efficient from a societal perspective? [5] 4. Government plans to impose an excise tax (per unit tax) on cigarette manufacturers. Illustrate how this can promote an efficient amount of cigarette consumption. [5]