Melbourne city council is trying to quantify the social cost of smoking in order to determine the optimal value of a tax on smoking. What factors should they include when calculating the social cost of smoking?

Question

Quizplus · Accepted Answer

The social cost of smoking should take into account not only the direct costs to the individual smoker, but also the costs imposed on society as a whole, including the harm caused to bystanders through exposure to secondhand smoke and the costs to the healthcare system. One of the major factors to include is the costs to bystanders affected by air pollution. The price consumers pay for cigarettes is also important as it can affect the demand for cigarettes and therefore the effectiveness of any tax on smoking. The chewing gum costs of smokers is not a relevant factor to include in the social cost of smoking.

Melbourne City Council Is Trying to Quantify the Social Cost