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Finance & Accounting
Pages 4 (1004 words)
A Brief on Externalities Case of British American Tobacco 1. The British American Tobacco has a long history of operation. It started in 1902 and is known as the one of the largest manufacturer of tobacco products. Although it has investment interests in financial service business with Zurich Group, a Swiss financial services company, BAT has remained focus on tobacco business.
A 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 attributed to cigarette smoking is the economic cost of health care 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 hand 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 maintenance and cleaning of the environment are negative externalities attributed to cigarette and tobacco. 2. Production process and what type of externalities are produced in each process Tobacco production starts with purchase of about 400,000 tons of tobacco leaf yearly from farmers coming from the emerging economies. ...
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