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Say that the government is considering a ban on smoking in restaurants in Tobaccoville. There are 1million people living there, and each would benefit by $200 from this smoking ban. However, there are two large tobacco companies in Tobaccoville and the ban would cost them $5 million each. What are the proposed policy's total costs and benefits? Do you think it will pass?
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let's define the benefit and the cost of this proposed ban. So the benefit would be that you have one million people, each of which gets a value of about $200 from this pan. So that's a total benefit of $200 million. Okay, what's the cost? Will The cost is $5 million to each of two companies, so that's a total of $10 million in cost. So at first glance, it looks like the benefit is clearly more than the cost, and this ban will go into effect. However, you have to remember a couple of factors. One is that the tobacco companies are much more likely than the one million residents. The tobacco companies are much more likely to actually lobby their lawmakers. You have a special interest that's going to be very well organized, compared to a 1,000,000 people that are gonna be very disorganized or not gonna be able toe act together as one very easily. It is also sometimes very difficult to deal with this problem of anonymous benefits, right in the text. It it explains that the costs are usually in this case, the costs are usually clearly defined against specific parties. But the benefits are anonymous. They just goto everybody. So when you put these different elements together, it seems actually unlikely that the van will go into effect. It seems unlikely that the band will get past because these companies are going to essentially put up to $10 million worth of lobbying to ensure that this band does not go into effect. And it's very unlikely that thes one million residents are together going to put forth that much money to lobby their government to put the ban into effect.
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