Suppose that there is a negative externality associated with
Alcohol consumption in the United States.Will the United States
Be better or worse off if it eliminates all tariffs on alcohol
Imports?
A)The United States will always be better off when tariffs on imported alcohol are eliminated.
B)The United States will always be worse off when tariffs on imported alcohol are eliminated.
C)The United States will be no better or worse off when tariffs on imported alcohol are eliminated.
D)The United States will be better off only if the private gains from trade exceed the increased social costs of alcohol
Consumption when tariffs on imported alcohol are eliminated.

Question

Quizplus · Accepted Answer

Eliminating tariffs on imported alcohol would lead to an increase in alcohol consumption, which would exacerbate the negative externality associated with alcohol consumption. However, if the private gains from trade (i.e. the benefits to consumers from having access to cheaper imported alcohol) exceed the increased social costs of alcohol consumption, then the United States would be better off overall. This is because the net gain to society from increased trade would outweigh the negative externality costs. Therefore, the United States would be better off only if the private gains from trade exceed the increased social costs of alcohol consumption when tariffs on imported alcohol are eliminated.

Suppose That There Is a Negative Externality Associated with