MIT's Public Finance and Public Policy course (14.41, Fall 2024) continues its unit on health externalities with Professor Jonathan Gruber examining smoking as a case study. He works through the economic argument for taxing or regulating cigarettes, weighing the external costs smokers impose on others, such as secondhand smoke and shared healthcare costs, against the internality argument that smokers themselves may not fully account for the harm to their future selves. Gruber uses standard supply and demand diagrams to show how a Pigouvian tax can be sized to correct the externality, and discusses empirical evidence on how responsive smoking rates are to price changes, including effects on teenagers. The lecture builds directly on the prior session's introduction to externalities, applying the general framework to a concrete, heavily studied policy problem. It runs seventy five minutes in a standard classroom lecture format with slides and blackboard work.