Use the following to answer question:
Figure 17.9
-(Figure 17.9) Suppose that eating asparagus reduces the incidence of contagious disease. The external marginal benefit of asparagus is $3. To achieve the socially optimal quantity of asparagus, the government should:

Question

Use the following to answer question:
Figure 17.9 
-(Figure 17.9) Suppose that eating asparagus reduces the incidence of contagious disease. The external marginal benefit of asparagus is $3. To achieve the socially optimal quantity of asparagus, the government should:

Quizplus · Accepted Answer

The socially optimal quantity of asparagus is where the marginal social benefit (MSB) equals the marginal social cost (MSC). Since eating asparagus reduces the incidence of contagious disease, the MSB of asparagus is the sum of the external marginal benefit ($3) and the private marginal benefit. The private marginal cost (PMC) is the same as the supply curve. To achieve the socially optimal quantity, the government should subsidize the production of asparagus by an amount equal to the external marginal benefit, which is $3 per pound. This will increase the supply of asparagus to 4,000 pounds, where the PMC equals the MSB. Therefore, choice C is the best choice.

Use the Following to Answer Question