While smoking is on the decline in the United States, China is ...

[futuristic]

While smoking is on the decline in the United States, China is still puffing away madly. That's not because the government is eager to protect its citizens from the hazards of smoking.
 
  It's because China is eager to protect its own tobacco industry which is a state monopoly. Why did China announce in 2009 that it won't allow foreign companies to build new cigarette factories or enter joint ventures? A) because China is concerned about the negative effects of smoking
  B) because China wants to protect the economic profits its state monopoly makes
  C) because China wants to protect jobs
  D) because China regulates the tobacco industry

Question 2

A private subsidy has what effect on the amount of a good or service produced? Is a private subsidy an appropriate policy to offset the inefficiency from an external cost or an external benefit?
 
  What will be an ideal response?

[zenzy]

Answer to Question 1

B

Answer to Question 2

A private subsidy increases the production of the good or service that is subsidized. A good or service with an external benefit is underproduced by a competitive, unregulated market. Because it increases the production, a private subsidy is the appropriate policy to overcome the inefficiency that is the result of an external benefit.