Multiple Choice
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:
Verified
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