Table 10-3

$$\begin{array} { | c | c | c | c | }
\hline \begin{array} { c }
\text { Quantity } \
\text { (Units) }
\end{array} & \begin{array} { c }
\text { Private Value } \
\text { (Dollars) }
\end{array} & \begin{array} { c }
\text { Private Cost } \
\text { (Dollars) }
\end{array} & \begin{array} { c }
\text { External Benefit } \
\text { (Dollars) }
\end{array} \
\hline 1 & 22 & 12 & 10 \
\hline 2 & 20 & 15 & 10 \
\hline 3 & 18 & 18 & 10 \
\hline 4 & 16 & 21 & 10 \
\hline 5 & 14 & 24 & 10 \
\hline 6 & 12 & 27 & 10 \
\hline
\end{array}$$
-Refer to Table 10-3. What amount of subsidy per unit of output would move the market from the equilibrium level of output to the socially optimal level of output?
A)$2
B)$3
C)$5
D)$10

Question

Table 10-3
​
​
 $$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { (Units) }
\end{array} & \begin{array} { c } 
\text { Private Value } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { Private Cost } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { External Benefit } \
\text { (Dollars) }
\end{array} \
\hline 1 & 22 & 12 & 10 \
\hline 2 & 20 & 15 & 10 \
\hline 3 & 18 & 18 & 10 \
\hline 4 & 16 & 21 & 10 \
\hline 5 & 14 & 24 & 10 \
\hline 6 & 12 & 27 & 10 \
\hline
\end{array}$$
-Refer to Table 10-3. What amount of subsidy per unit of output would move the market from the equilibrium level of output to the socially optimal level of output?
A)$2
B)$3
C)$5
D)$10

Quizplus · Accepted Answer

The socially optimal level of output is where the private value plus the external benefit equals the private cost. The subsidy needed per unit of output would be equal to the external benefit of $10, as this would align the private cost with the social value (private value plus external benefit).

Table 10-3 ​ ​ -Refer to Table 10-3

Table 10-3

-Refer to Table 10-3