The Rand Corporation Estimates That External Costs Imposed by Alcohol

question 11

Multiple Choice

The Rand Corporation estimates that external costs imposed by alcohol consumption (e.g., deaths caused by drunk drivers) to be 48 cents per ounce consumed.If taxes on alcohol are 23 cents per ounce consumed, then

• A)marginal social benefit is greater than marginal social cost.
• B)the alcohol taxes are increasing economic inefficiency and dead-weight loss.
• C)alcohol consumption is greater than socially optimal.
• D)marginal external costs plus marginal private costs are less than price.

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Definitions:

Interest Rate Movements

The fluctuations in interest rates which can affect the cost of borrowing money and the performance of investments.

Interest Rates

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan amount.

Supply and Demand

Economic model describing how prices vary as a result of a balance between product availability and the desire of consumers.

Federal Reserve

The central banking system of the United States, responsible for setting monetary policy, regulating banks, and providing financial services to the government.