Refer to the competitive market diagram for product Z. Assume that the current market demand and supply curves for Z are D2 and S2. If there are substantial external beneﬁts associated with the
Production of Z, then
A) eﬃcient resource allocation occurs at output G and price B because the market mechanism does not measure all beneﬁts.
B) an output smaller than G would improve resource allocation.
C) government should levy a per-unit excise tax on Z to shift the demand curve toward D1.
D) an output greater than G would result in a more eﬃcient allocation of resources.

Question

Refer to the competitive market diagram for product Z. Assume that the current market demand and supply curves for Z are D2 and S2. If there are substantial external beneﬁts associated with the
Production of Z, then
A) eﬃcient resource allocation occurs at output G and price B because the market mechanism does not measure all beneﬁts. 
B) an output smaller than G would improve resource allocation. 
C) government should levy a per-unit excise tax on Z to shift the demand curve toward D1. 
D) an output greater than G would result in a more eﬃcient allocation of resources.

Quizplus · Accepted Answer

The Answer of  Refer to the competitive market diagram for product Z. Assume that the current market demand and supply curves for Z are D2 and S2. If there are substantial external beneﬁts associated with the
Production of Z, then
A) eﬃcient resource allocation occurs at output G and price B because the market mechanism does not measure all beneﬁts. 
B) an output smaller than G would improve resource allocation. 
C) government should levy a per-unit excise tax on Z to shift the demand curve toward D1. 
D) an output greater than G would result in a more eﬃcient allocation of resources.

Refer to the Competitive Market Diagram for Product Z