The government knows the market equilibrium is at point a, however it does not k

Question

The government knows the market equilibrium is at point a, however it does not know where the socially optimal equilibrium is. As an economist you know if there is only a positive externality in production, the socially optimal equilibrium could be at point _____. If there is only a negative externality in consumption it could be at point _____. If there is a positive externality in production and a negative externality in consumption, the socially optimal equilibrium could be at point ______.

A. point b; point c; point e.

B. point e; point c; point d.

C. point e; point d; point c.

D. point b; point e; point c.

E. point c; point d; point e.

Explanation / Answer

Let's go through each scenario one-by-one and consider what each balnk should be given that each scenario starts with market equilibrium at point A. We can then line up these answers to get the final answer.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.