The external costs of alcohol consumption are related to, among other things, death and injury related to auto accidents caused by drunk drivers.These costs have been estimated to be about 47 cents per ounce of alcohol consumed.Taxes on alcohol amount to 23 cents per ounce.This suggests that alcohol consumption is (i) greater than the efficient or optimal amount; (ii) should be reduced to zero to eliminate the externality.
A)i and ii
B)i not ii
C)ii not i
D)neither i nor ii

Question

Quizplus · Accepted Answer

The external costs suggest that the current level of alcohol consumption is greater than the efficient amount because the taxes (23 cents) do not fully cover the external costs (47 cents), indicating that consumption is higher than what would be socially optimal. However, it does not imply that consumption should be reduced to zero, as some level of consumption might still be socially acceptable or beneficial, and the goal is typically to internalize the external costs, not eliminate the activity entirely.

The External Costs of Alcohol Consumption Are Related To, Among