The graph below illustrates a market for cigarettes. Use it to answer the questions that follow. a.
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The graph below illustrates a market for cigarettes. Use it to answer the questions that follow.
a. Based only on the graph, are there positive or negative externalities associated with cigarettes? Explain your answer.
b. Show the equilibrium price and quantity in this market.
c. What is the socially optimal quantity in this market?
d. According to the graph, what is the marginal external cost of a packet of cigarettes?
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