Suppose that production of steel in the United States involves negative externalities. Now suppose that U.S. tariffs on steel imports are eliminated and U.S. imports of steel increase. What effect does the elimination of these tariffs have on total social costs associated with steel production in the United States?

Question

Quizplus · Accepted Answer

Eliminating tariffs on steel imports allows for increased imports, which can reduce domestic production of steel. Since domestic production involves negative externalities (e.g., pollution), reducing this production decreases the associated negative externalities, thereby lowering total social costs.

Suppose That Production of Steel in the United States Involves