Suppose that there is a negative externality associated with alcohol consumption in the United States. What does this negative consumption externality imply about the relationship between the demand curve for alcohol and the social marginal benefit (SMB) curve for alcohol?
a. The demand curve and the SMB curve for alcohol are identical.
b. The demand curve lies below the SMB curve for alcohol.
c. The demand curve lies above the SMB curve for alcohol.
d. The demand curve intersects the SMB curve at the market equilibrium price.
Ans: c. The demand curve lies above the SMB curve for alcohol.
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