Refer to the above figure. The market equilibrium quantity is Q1. Point Q2 represents the optimal amount of production. The government can achieve the optimal outcome by
A) setting the price at P3.
B) providing a per-unit subsidy to consumers equal to P3 - P1.
C) providing a per-unit subsidy to consumers equal to P2 - P1.
D) establishing a tax equal to P2 - P1 per unit of the good sold.
B
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A monopoly sets a price of $50 per unit for an item that has a marginal cost of $10. Assuming profit maximization, the implicit demand elasticity is
A) -0.2. B) -0.8. C) -1.25. D) -5.0.
Which of the following is true of U.S. net exports prior to the 1960s?
a. Since most of the oil needs of the U.S. were met through imports, imports exceeded exports prior to the 1960s in the U.S. b. Prior to the 1960s, exports from the U.S. more or less equalled imports into the U.S. c. The U.S. was running a trade surplus prior to the 1960s. d. Prior to the 1960s, the U.S. ran twin deficits- both a current account deficit as well as a budget deficit. e. Since the U.S. dollar was overvalued prior to the 1960s, the U.S. neither exported nor imported any goods and services.