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

question 193

Multiple Choice

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

• A) setting the price at P1.
• B) establishing a tax of P3 - P1 per unit of the good sold.
• C) establishing a tax of P3 - P2 per unit of the good sold.
• D) setting the price at P4.

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Definitions:

Thailand Bahts

The currency of Thailand, used as the standard monetary unit in the country.

Put Option

A financial contract that gives the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price within a specified time frame.

Fair Hedge

A financial strategy used to reduce risk by taking offsetting positions in a security and its derivative, ensuring gains in one offset losses in the other.

British Pounds

The currency of the United Kingdom, also known as GBP (Great British Pound).