Refer to the above supply and demand graph. Point A represents the current equilibrium level of output of this product and point B represents the optimal level of output from society's perspective. The amount of the subsidy to be given to consumers to correct this externality problem would be measured by:
A. EF.
B. IJ.
C. AB.
D. GH.
Answer: B
You might also like to view...
Under monopolistic competition, firms make zero economic profit in the long run and produce at the minimum ATC
Indicate whether the statement is true or false
Most recessions in the United States since World War II have begun with
A) a decline in residential construction. B) a rapid increase in the price level. C) a stock market crash. D) a substantial number of bank failures.
If $1000 was deposited in a bank and the reserve requirement is 0.20, how much is available for loans?
A) $900 B) $910 C) $800 D) $930
Demand is given by QD = 6000 - 50P. Domestic supply is QS = 25P. Foreign producers can supply any quantity at a price of $40
a. If foreign producers can sell in the domestic market, what is the equilibrium price? What is the equilibrium quantity? How much is sold by domestic and foreign producers, respectively? b. Under domestic government pressure, foreign producers voluntarily agree to restrict their goods. What will happen to the price and quantity? What will happen to the amount that domestic producers supply? What will happen to revenues of domestic and foreign producers?