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

question 55

Multiple Choice

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

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

---

Definitions:

Monetary Growth

An increase in the amount of money in an economy, which can influence inflation, interest rates, and economic growth.

Real GDP

The measure of a country's economic output adjusted for price changes (inflation or deflation).

Average Price

The average price is a calculated central value of a range of prices for a given product, service, or asset over a specific time period.

United States

The United States is a federal republic composed of 50 states, a federal district, five major self-governing territories, and various possessions, known for its significant influence on global economics, politics, and culture.