Solved

Figure 8.1 -In Figure 8.1, Market Equilibrium Occurs at X, but X*

Question 23

Multiple Choice

  Figure 8.1 -In Figure 8.1, market equilibrium occurs at X, but X<sup>*</sup> is the socially optimal quantity. The government can achieve the optimal solution by A)  setting the price at P<sub>1</sub>. B)  establishing a tax equal to P<sub>3</sub> - P<sub>1</sub> per unit of the good sold. C)  establishing a tax equal to P<sub>3</sub> - P<sub>2</sub> per unit of the good sold. D)  setting the price at P<sub>4</sub>. Figure 8.1
-In Figure 8.1, market equilibrium occurs at X, but X* is the socially optimal quantity. The government can achieve the optimal solution by


A) setting the price at P1.
B) establishing a tax equal to P3 - P1 per unit of the good sold.
C) establishing a tax equal to P3 - P2 per unit of the good sold.
D) setting the price at P4.

Correct Answer:

verifed

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Unlock this Answer For Free Now!

View this answer and more for free by performing one of the following actions

qr-code

Scan the QR code to install the App and get 2 free unlocks

upload documents

Unlock quizzes for free by uploading documents