Figure 10-1
-Refer to Figure 10-1. This graph represents the tobacco industry. The socially optimal price and quantity are
A)$9.00 and 60 units, respectively.
B)$8.40 and 48 units, respectively.
C)$6.21 and 76 units, respectively.
D)$4.50 and 100 units, respectively.

Question

Figure 10-1 
-Refer to Figure 10-1. This graph represents the tobacco industry. The socially optimal price and quantity are
A)$9.00 and 60 units, respectively. 
B)$8.40 and 48 units, respectively. 
C)$6.21 and 76 units, respectively. 
D)$4.50 and 100 units, respectively.

Quizplus · Accepted Answer

The socially optimal price and quantity occur where the social marginal cost (SMC) curve intersects the demand curve, which is at $8.40 and 48 units, respectively. This point reflects the true cost to society, including externalities, of producing and consuming the product.

Figure 10-1 -Refer to Figure 10-1. This Graph Represents the Tobacco Industry