British American Tobacco Coursework Example | Topics and Well Written Essays - 1000 words

British American Tobacco - Coursework ExampleA negative externality is generated by an action when it imposes a cost on someone else who had no control over the action. Types of externalities. The common externality attri buted to bottom smoking is the economic cost of health c be to non-smokers as well as to smokers themselves. Another externality is the health effects of environmental smoke to non smokers and to their families. Report of CDC (2010) said that premature deaths and smoke related diseases in nonsmokers were caused by second strive smoke. Smoking also pollutes the air environment, the lands, and water. Air is polluted by chemicals in the cigarette which is breathed out, cigarette butts end in the grounds and inevitably flushed in the water. The costs related to health keep and cleaning of the environment are negative externalities attributed to cigarette and tobacco. 2. Production touch and what type of externalities are produced in each process Tobacco production starts with purchase of about 400,000 tons of tobacco leaf annually from farmers coming from the emerging economies. Negative externalities in tobacco production are ground water defilement from fertilizer use, deforestation, food contamination and farm worker exposure to toxic chemicals from pesticide use, water and energy use, and fires caused by cigarette smoking. A positive externality is also produced such as social cost that includes income benefits to agriculture, farmers and families and militant advantage of production of emerging countries. The second process in cigarette and tobacco production is the manufacturing process done through 50 factories in 41 countries. Once the processed leaf arrives at the factory, it is checkered for quality and blending, and the rest of the activity are fully automated and no longer done by hand. Quality control is top priority and tracking of production is done by computers ( flail). As untried technology is introduced in the manufactur ing process, reduction of employment is necessary and some machines are rendered obsolete. Negative externality produced in the manufacturing is the loss of income due to cost reduction of the company and the cost of machines that have to be destroyed. Policy of BAT is to destroy old machines to prohibit counterfeit of cigarettes. 3. How does government try to control externalities? Government tries to control externalities of tobacco and cigarette consumption thru policies and regulations. Government uses production appraisees, consumption taxes, restriction, quota and subsidies to agricultural products. The government is often called upon to intervene in the market to resolve externality problems. Government agencies such as the Environmental Protection Agency are established to set and enforce air quality standards, and taxes are imposed to obtain fund to concede for external costs or subsidize external benefits. The United States has imposed an increase of excise tax that took effect July, 2010, with some states charging low, and others too high (NCSL, 2010). 4. Are the externalities controlled effectively? Are there other ways other externality could be? controlled. Under an unregulated market where there is no control, firms maximize their profits, but subsequent problems arise due to externalities. Under this condition, government intervention is needed to bring back