The figure below illustrates the private costs and benefits of producing trisenian, a new miracle drug. a) Draw the MSB and MSC curves on the graph assuming the external benefits are estimated at $6 per unit and the external costs at $3 per unit.
b) What are the most desirable price and quantity from society's point of view?
c) If government wanted to increase the quantity to the amount in b) above, what subsidy would it need to give the producers?
d) If, instead, government wanted to increase the quantity to the amount in b) above, what subsidy would it need to given consumers?

Question

The figure below illustrates the private costs and benefits of producing trisenian, a new miracle drug.  a) Draw the MSB and MSC curves on the graph assuming the external benefits are estimated at $6 per unit and the external costs at $3 per unit.
b) What are the most desirable price and quantity from society's point of view?
c) If government wanted to increase the quantity to the amount in b) above, what subsidy would it need to give the producers?
d) If, instead, government wanted to increase the quantity to the amount in b) above, what subsidy would it need to given consumers?

Quizplus · Accepted Answer

The Answer of The figure below illustrates the private costs and benefits of producing trisenian, a new miracle drug.  a) Draw the MSB and MSC curves on the graph assuming the external benefits are estimated at $6 per unit and the external costs at $3 per unit.
b) What are the most desirable price and quantity from society's point of view?
c) If government wanted to increase the quantity to the amount in b) above, what subsidy would it need to give the producers?
d) If, instead, government wanted to increase the quantity to the amount in b) above, what subsidy would it need to given consumers?

The Figure Below Illustrates the Private Costs and Benefits of Producing