Use the figure below to answer the following questions. Figure 15.3.2
-Refer to Figure 15.3.2.The figure shows the market for good B.Which of the following government policies creates an efficient outcome?
A)Tax the production of B by $3 per unit.
B)Tax the production of B by $4 per unit.
C)Provide vouchers for consumption of B of $1 per unit.
D)Provide vouchers for consumption of B of $3 per unit.
E)Provide vouchers for consumption of B of $4 per unit.

Question

Use the figure below to answer the following questions.  Figure 15.3.2
-Refer to Figure 15.3.2.The figure shows the market for good B.Which of the following government policies creates an efficient outcome?
A)Tax the production of B by $3 per unit. 
B)Tax the production of B by $4 per unit. 
C)Provide vouchers for consumption of B of $1 per unit. 
D)Provide vouchers for consumption of B of $3 per unit. 
E)Provide vouchers for consumption of B of $4 per unit.

Quizplus · Accepted Answer

The efficient outcome occurs where the marginal social benefit (MSB) equals the marginal social cost (MSC), which occurs at a quantity of 120 units and a price of $6 per unit. Providing vouchers for consumption of B of $3 per unit will shift the demand curve upward (to the right) by $3, aligning the marginal private benefit (MPB) with the MSB. This will result in the efficient outcome. Taxing the production of B will increase marginal cost, moving the supply curve upward, causing a reduction in quantity and an increase in price. Providing vouchers for consumption of B of $1 or $4 will not align the MPB with the MSB, resulting in an inefficient outcome.

Use the Figure Below to Answer the Following Questions