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Figure: Marginal Private Benefits and Marginal Social Benefits

Question 229

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Figure: Marginal Private Benefits and Marginal Social Benefits
(Figure: Marginal Private Benefits and Marginal Social Benefits) Look at the figure Marginal Private Benefits and Marginal Social Benefits.One way for the government to achieve this socially optimal level is by:


A) imposing a per-unit tax equal to P₁ - P₂.
B) providing a per-unit subsidy of P0 - P₂.
C) mandating consumption at output level Q₁.
D) leaving the quantity at the initial private market-clearing quantity and price.

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