Refer to the provided supply and demand graph for a product. In the graph, line S is the current supply of this product, while line S₁ is the optimal supply from the society's perspective. One solution to this externality problem is to
A)give consumers a subsidy of the amount FG per unit.
B)give producers a subsidy of the amount AB per unit.
C)tax producers by the amount DE per unit.
D)tax consumers by the amount EF per unit.

Question

Refer to the provided supply and demand graph for a product. In the graph, line S is the current supply of this product, while line S₁ is the optimal supply from the society's perspective. One solution to this externality problem is to
A)give consumers a subsidy of the amount FG per unit. 
B)give producers a subsidy of the amount AB per unit. 
C)tax producers by the amount DE per unit. 
D)tax consumers by the amount EF per unit.

Quizplus · Accepted Answer

The Answer of  Refer to the provided supply and demand graph for a product. In the graph, line S is the current supply of this product, while line S₁ is the optimal supply from the society's perspective. One solution to this externality problem is to
A)give consumers a subsidy of the amount FG per unit. 
B)give producers a subsidy of the amount AB per unit. 
C)tax producers by the amount DE per unit. 
D)tax consumers by the amount EF per unit.

Refer to the Provided Supply and Demand Graph for a Product