Suppose That Cigarette Smokers Create a Negative Externality

Multiple Choice

Suppose that cigarette smokers create a negative externality. Further suppose that the government imposes a tax on cigarettes equal to the per-unit externality. What is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of cigarettes?

A) They are equal.
B) The after-tax equilibrium quantity is greater than the socially optimal quantity.
C) The after-tax equilibrium quantity is less than the socially optimal quantity.
D) There is not enough information to answer the question.