Final answer:
The United States will be better off eliminating tariffs on alcohol imports only if the private gains from trade exceed the increased social costs of alcohol consumption. This requires a careful consideration of the trade-offs between economic benefits of reduced prices and increased choices for consumers and the potential social harms associated with greater alcohol consumption. Therefore correct option is D
Step-by-step explanation:
The question assesses whether the United States will be better or worse off by eliminating all tariffs on alcohol imports, given a negative externality associated with alcohol consumption. Tariffs and quotas are forms of protectionism that can affect consumer surplus and producer surplus in the importing country. For instance, imposing a tariff or quota reduces trade, raises prices for consumers, reduces consumer surplus, increases producer surplus, and can generate government revenue from the tariffs.
Conversely, removing tariffs on imports can cause prices to fall and increase the quantity of imports, benefiting consumers but potentially harming domestic producers.
However, the evaluation of whether the United States will be better or worse off depends on a calculation of private gains from trade against the social costs associated with alcohol consumption, such as health issues or accidents. In this case, 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. Thus, the correct answer is D.