-In the Above Figure, Market Equilibrium at Point E Yields

question 178

Multiple Choice

-In the above figure, market equilibrium at point E yields the quantity X. The quantity is socially optimal amount. The government can achieve the optimal outcome by

• A)setting the price at .
• B)establishing a tax of - per unit of the good sold.
• C)establishing a tax of - per unit of the good sold.
• D)setting the price at .

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Definitions:

Supply and Demand

The fundamental economic model that describes how prices are determined in a market based on the available quantity of goods or services and the desire for them.

Equilibrium Price

The price at which the supply of an item matches its demand, ensuring that the market is in balance.

Excess Supply

A situation where the quantity of a good or service supplied surpasses the quantity demanded at a specific price.

Excess Demand

Excess demand occurs when the quantity demanded of a product or service at a given price exceeds the quantity supplied, often leading to a shortage.