-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 $P _ { 1 }$ .
B)establishing a tax of $\mathrm { P } _ { 3 }$ - $P _ { 1 }$ per unit of the good sold.
C)establishing a tax of $\mathrm { P } _ { 3 }$ - $P _ { 2 }$ per unit of the good sold.
D)setting the price at $\mathrm { P } _ { 4 }$ .

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 $P _ { 1 }$ . 
B)establishing a tax of $\mathrm { P } _ { 3 }$ - $P _ { 1 }$ per unit of the good sold. 
C)establishing a tax of $\mathrm { P } _ { 3 }$ - $P _ { 2 }$ per unit of the good sold. 
D)setting the price at $\mathrm { P } _ { 4 }$ .

Quizplus · Accepted Answer

The government can achieve the optimal outcome by establishing a tax of $\mathrm { P } _ { 3 }$ -$P _ { 1 }$ per unit of the good sold. This tax will shift the supply curve to the left, resulting in a new equilibrium at point E*, where the quantity produced is $X ^ { * }$.

-In the Above Figure,market Equilibrium at Point E Yields the Quantity