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Market Failure and the Tobacco Industry Any business or corporation in operation today is subject to market failure if they arent already experiencing it Market failure is the simple misallocation or the inefficiency of allocation of resources This then results in waste or lost value that the company or business must endure and deal with The source of market failure that I will be discussing are the external costs of producing tobacco products and imperfect information The source of the external costs is from the taxation that the government imposes on the various companies because of their pollution rates caused by their factories during production Since the companies will be using factories to produce their products there will be one definite type of pollution which is air pollution Since the supply of various tobacco products will be produced in mass quantities there will also be an abundance of air pollution coming from the factory Today air pollution is one of the biggest problems dealing with pollution This single factor has been the main cause of many world wide problems like acid rain the green house effect etc Since this has so many effects on the Earth and is such a problem any measure that can be taken is being taken to reduce the amount there is One of these measures that has been taken is for the government to tax the businesses that have pollution problems This tax in effect forces the industry to lower its pollution rate or pay a tax The factories have been given a certain standard that they must follow which is the limit of air pollution they can produce and if they are over it they will get taxed because of that This tax is of coarse on top of a regular tax that must be paid for the simple fact that the factory does evitably pollute This graph shows the affects that excessive
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