-In the above figure, market equilibrium at point E yields the quantity X. The quantity X* is socially optimal amount. The government can achieve the optimal outcome by
A)setting the price at P₁.
B)establishing a tax of P₃ - P₁ per unit of the good sold.
C)establishing a tax of P₃ - P₂ per unit of the good sold.
D)setting the price at P₄.

Question

-In the above figure, market equilibrium at point E yields the quantity X. The quantity X* is socially optimal amount. The government can achieve the optimal outcome by
A)setting the price at P₁. 
B)establishing a tax of P₃ - P₁ per unit of the good sold. 
C)establishing a tax of P₃ - P₂ per unit of the good sold. 
D)setting the price at P₄.

Quizplus · Accepted Answer

The Answer of 
-In the above figure, market equilibrium at point E yields the quantity X. The quantity X* is socially optimal amount. The government can achieve the optimal outcome by
A)setting the price at P₁. 
B)establishing a tax of P₃ - P₁ per unit of the good sold. 
C)establishing a tax of P₃ - P₂ per unit of the good sold. 
D)setting the price at P₄.

-In the Above Figure, Market Equilibrium at Point E Yields