Answer to Question #145794 in Microeconomics for jb

Question

Suppose you are told that electronic cigarettes cause health problems such as depression and problems with arteries. You also are told that electronic cigarettes do NOT produce second-hand smoke, meaning that e-smoking (called “vaping”) by one person does not harm a person standing nearby. How might economists respond?

a.
A standard welfare economist would say that e-smoking imposes an externality if health insurance is pooled and premiums are shared.

b.
A standard welfare economist would say that e-smoking does not increase social costs, unless having health insurance makes people more likely to use electronic cigarettes.

c.
A behavioral economics would ask if people who use e-cigarettes become addicted.

d.
All of the above.

Answer 1

$\bold {Answer}$ d

All of the above

$\bold {Explanation}$

In economic sense, smoking is considered an economic bad because it, generally, yeild negative externalities. Smoking has no tangible marginal benefits.

Thus, since smoking causes healthy problems, it implies that if health insurance is pooled and premiums shared, nonsmokers will contribute towards compensating patients suffering from smoking related diseases. This is a negative externality.

Since smoking has no tangible marginal benefits, behavioral economists would want to understand reasons people make such irrational choices, like e-smoking.