Exhibit 17-1 -If Technology Is Fixed,the Discrepancy Between the Private Equilibrium and Private

question 30

Multiple Choice

Exhibit 17-1
-If technology is fixed,the discrepancy between the private equilibrium and the efficient level of output in Exhibit 17-1 is best eliminated by

• A)subsidizing the production of the good by $10 per unit
• B)taxing the firm producing the good by $10 per unit
• C)using a quota system to encourage production of at least 160 units of the good
• D)using a quota system to restrict production of the good to no more than 160 units
• E)letting the private market operate freely to determine output at equilibrium

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Definitions:

GDP Deflator

A measure that reflects the prices of all goods and services produced domestically, accounting for inflation within a country's economy.

Base Year

A reference year against which economic growth, price changes, or other data is compared in indexes or other statistical measures.

GDP Deflator

A measure of the level of prices of all new, domestically produced, final goods and services in an economy, used to deflate nominal GDP to real GDP.

Percentage Change

A mathematical calculation that represents the degree of change over time, expressed as a percent, indicating how much something has increased or decreased.