Smoking induces secondhand smoke, imposing costs on non-smokers. (a) Draw a graph for demand curve, supply curve and social-value curve. Briefly explain the difference between market equilibrium and socially optimal equilibrium (10 points). (b) What problem does this market cause? Shade the area on your graph for that problem. Briefly explain why that problem occurs.

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a Graph for Demand Curve Supply Curve and SocialValue Curve In this scenario the market for cigarettes causes a negative externality in the form of secondhand smoke imposed on nonsmokers The graph bel... View the full answer