The following graph shows equilibrium in a market in the presence of an externality. If technology is fixed, the discrepancy between the market output and the efficient level of output is eliminated by______.
Figure 17.2

A)subsidizing production of the good by $10 per unit
B)taxing the firm producing the good $10 per unit
C)using a quota system to restrict production to 160 units.
D)subsidizing production of the good by $5 per unit
E)letting the private market operate freely

Question

The following graph shows equilibrium in a market in the presence of an externality. If technology is fixed, the discrepancy between the market output and the efficient level of output is eliminated by______.​ ​
Figure 17.2

A)subsidizing production of the good by $10 per unit 
B)taxing the firm producing the good $10 per unit​ 
C)using a quota system to restrict production to 160 units. 
D)subsidizing production of the good by $5 per unit​ 
E)letting the private market operate freely​

Quizplus · Accepted Answer

The Answer of The following graph shows equilibrium in a market in the presence of an externality. If technology is fixed, the discrepancy between the market output and the efficient level of output is eliminated by______.​ ​
Figure 17.2

A)subsidizing production of the good by $10 per unit 
B)taxing the firm producing the good $10 per unit​ 
C)using a quota system to restrict production to 160 units. 
D)subsidizing production of the good by $5 per unit​ 
E)letting the private market operate freely​

The Following Graph Shows Equilibrium in a Market in the Presence