Refer to the Competitive Market Diagram for Product Z

question 152

Multiple Choice

Refer to the competitive market diagram for product Z. Assume that the current market demand and supply curves for Z are D₁ and S₁. If there are substantial external benefits associated with the production of Z, then

• A)government can improve the allocation of resources by subsidizing consumers of Z.
• B)government can improve the allocation of resources by imposing a per-unit tax on Z.
• C)a government subsidy for producers of Z would ensure that consumers are paying directly for all of the benefits they receive from Z.
• D)consumers are paying too much for the good.