Figure 10-2
-Refer to Figure 10-2.Assume the production of plastic imposes a cost on society of $2.00 per unit.If the free market equilibrium output is 650 units,the government should
A) impose a tax of $1.50 per unit.
B) increase the output of the firm by 50 units.
C) offer a subsidy of $2.00 per unit..
D) impose a tax of $2.00 per unit.

Question

Figure 10-2 
-Refer to Figure 10-2.Assume the production of plastic imposes a cost on society of $2.00 per unit.If the free market equilibrium output is 650 units,the government should
A) impose a tax of $1.50 per unit. 
B) increase the output of the firm by 50 units. 
C) offer a subsidy of $2.00 per unit.. 
D) impose a tax of $2.00 per unit.

Quizplus · Accepted Answer

The government should impose a tax equal to the cost imposed on society, which in this case is $2.00 per unit. This tax will shift the supply curve to the left, resulting in a higher price and lower output, reducing the negative impact on society. Therefore, the correct answer is to impose a tax of $2.00 per unit.

Figure 10-2 -Refer to Figure 10-2.Assume the Production of Plastic Imposes a Plastic