-The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for raising goats on a common pasture. Suppose the government assigns individual transferable quotas (ITQ) set to achieve the efficient outcome. The market price of an ITQ is ________ per pound.
A) $4.20
B) $2.00
C) $6.00
D) $4.00

Question

-The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for raising goats on a common pasture. Suppose the government assigns individual transferable quotas (ITQ) set to achieve the efficient outcome. The market price of an ITQ is ________ per pound.
A) $4.20 
B) $2.00 
C) $6.00 
D) $4.00

Quizplus · Accepted Answer

The market price of an ITQ is determined by the difference between the marginal social cost and the marginal private cost at the efficient quantity. The efficient outcome occurs where the marginal social cost equals the marginal social benefit. The price of the ITQ reflects the external cost, which is $4.20 per pound.

-The Above Figure Shows the Marginal Private Cost Curve, Marginal