Although for smokers the marginal benefit from smoking may exceed the marginal cost of smoking, the negative effects of second-hand smoke may increase the marginal costs of smoking to society to a point where it exceeds that marginal benefit to society. This is an example of:
A)individual actions whose side effects are not properly taken into account by the market.
B)one party preventing mutually beneficial trades in an attempt to capture a greater share of resources for itself.
C)some goods' unsuitability for efficient management by markets.
D)regulating self-interest.

Question

Quizplus · Accepted Answer

This is an example of negative externality, where the side effects of an individual's actions (smoking) are not taken into account by the market, leading to inefficient allocation of resources. In this case, the marginal cost to society (health costs, pollution, etc.) exceed the marginal benefit to the smoker, causing market failure. This situation warrants government intervention, such as regulating or taxing smoking to internalize the negative externality.

Although for Smokers the Marginal Benefit from Smoking May Exceed