-The above figure shows the marginal social benefit, marginal private cost and marginal social cost of producing steel. If the market is competitive, what government policy might move the market closer to efficiency?
A) The government could subsidize the production of steel.
B) The government could tax the production of steel.
C) The government could issue vouchers to steel consumers.
D) None of the above answers is correct.

Question

-The above figure shows the marginal social benefit, marginal private cost and marginal social cost of producing steel. If the market is competitive, what government policy might move the market closer to efficiency?
A) The government could subsidize the production of steel. 
B) The government could tax the production of steel. 
C) The government could issue vouchers to steel consumers. 
D) None of the above answers is correct.

Quizplus · Accepted Answer

A tax on the production of steel would internalize the external cost, aligning the marginal private cost with the marginal social cost, thus moving the market closer to efficiency.

-The Above Figure Shows the Marginal Social Benefit, Marginal Private