Suppose That Alcohol Consumption Creates a Negative Externality

question 353

Multiple Choice

Suppose that alcohol consumption creates a negative externality. What can the government do to equate the equilibrium quantity of alcohol and the socially optimal quantity of alcohol?

• A)impose a tax on alcohol that is equal to the per-unit externality
• B)offer a subsidy on alcohol that is equal to the per-unit externality
• C)impose a regulation limiting the amount of alcohol that each consumer can purchase
• D)nothing

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