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.
Ans: 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.
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