Question

The Government may prevent negative external effects by levying a tax on goods and services that result in additional costs. Government intervention is needed to help "balance" negative externalities. With a negative external effect, the goods' value is higher than assumed. Because the social marginal cost curve is higher than the private marginal cost curve, the Government should intervene to increase taxes on goods such as imposing tariffs on polluting industries or taxing bad goods such as alcohol.Which is why the government would levy taxes on such items as cigarettes. We then have to ask ourselves, why aren't cigarettes banded altogether?

Answer 1

Cigarettes aren't banned because as heavy taxes are imposed by government on it but people purchase it and from which government generate a heavy amount of income from the taxes received from the industries who are producing cigarettes.

For preventing negative externalities government has imposed heavy taxes on these types of products for balance and it leads to the price of the product much high than it is expected.

Cigarettes cannot be banned by government and if banned than a large part of income of government will not be there with government as they collect taxes which is there source of an income.

PLEASE DO LIKE