Refer to the diagram in which S is the market supply curve and S 1 is a supply curve comprising all costs of production, including external costs. Assume that the number of peopleaffected by these external costs is large. If the government wishes to
establish an optimal allocation of resources in this market, it should:
A. not intervene because the market outcome is optimal.
B. subsidize consumers so that the market demand curve shifts leftward.
C. subsidize producers so that the market supply curve shifts leftward (upward).
D. tax producers so that the market supply curve shifts leftward (upward).
D. tax producers so that the market supply curve shifts leftward (upward).
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Economists use game theory to analyze oligopolies because
A) it is more enjoyable for economists and students to learn by playing games. B) game theory is useful in understanding the actions of firms that are price takers. C) game theory helps us to understand why interactions among firms are crucial in determining profitable business strategies. D) real markets are too complicated to analyze without using games.
The discount rate is the rate charged by the Fed on consumer loans it makes to the public, such as for student loans, automobile loans, or mortgage loans
Indicate whether the statement is true or false