Final answer:
Applying firewall rules by tag allows the rules to dynamically apply to VMs, irrespective of the IP addresses assigned to them.
Step-by-step explanation:
One benefit of applying firewall rules by tag rather than by address is that tags allow for dynamic application of firewall rules. Specifically, when a virtual machine (VM) is created with a matching tag, the firewall rules apply to that VM no matter what IP address is assigned to it. This is highly advantageous in environments where VMs are frequently created and destroyed, and IP addresses are subject to change due to being dynamically allocated.