If the Government Wanted to Reduce Alcohol Consumption in the United

Multiple Choice

If the government wanted to reduce alcohol consumption in the United States, would a state tax or federal tax be most effective?

A) A state tax on alcohol consumption would be more effective because state taxes affect more buyers.
B) A state tax on alcohol consumption would be more effective because the elasticity of demand is higher at the state level than at the federal level.
C) A federal tax on alcohol consumption would be more effective because the elasticity of demand is higher at the federal level than at the state level.
D) A federal tax on alcohol consumption would be more effective because suppliers cannot as easily avoid the tax simply by shipping alcohol to other states.