-Refer to the diagram above.With the appropriate tax rate imposed on producers,the socially optimal level of output would be _____ units at the socially optimal price of _____ per unit.
A) 100;$1.30
B) 100;$0.90
C) 100;$1.50
D) 120;$1.00
E) 120;$1.40

Question

-Refer to the diagram above.With the appropriate tax rate imposed on producers,the socially optimal level of output would be _____ units at the socially optimal price of _____ per unit.
A) 100;$1.30 
B) 100;$0.90 
C) 100;$1.50 
D) 120;$1.00 
E) 120;$1.40

Quizplus · Accepted Answer

The socially optimal level of output occurs where the marginal social cost equals the marginal social benefit. With the appropriate tax, this is achieved at 100 units with a price of $1.30.

-Refer to the Diagram Above