Suppose That Cookie Producers Create a Positive Externality Equal to $2

question 3

Multiple Choice

Suppose that cookie producers create a positive externality equal to $2 per dozen. What is the relationship between the equilibrium quantity and the socially optimal quantity of cookies to be produced?

• A)They are equal.
• B)The equilibrium quantity is greater than the socially optimal quantity.
• C)The equilibrium quantity is less than the socially optimal quantity.
• D)There is not enough information to answer the question.

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Definitions:

Canada Day

A national holiday in Canada commemorating the anniversary of the Constitution Act, 1867, which united three colonies into a single country called Canada within the British Empire.

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A component of the psyche that operates below the level of conscious awareness, influencing thoughts, feelings, and behaviors, often derived from Freudian psychological theory.

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