Private Cost E F Social Benefit `D (private benefit) QMARKET QOPTIMUM e area otimal quantity, the government should implement a corrective (tax/subsidy) . This means that the government w welfare. orrective policy in the market: "E. D+E+F+G e private market welfare due to the government intervention.

Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781305971509
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter6: Supply, Demand, And Government Policies
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QUESTION 7
Consider this following graph
Private Cost
A
P2-
В
PMarket
F
C
P
D
Social Benefit
'D (private benefit)
QMARKET QOPTIMUM
Q
The DWL is equivalent to area
In order
achieve the optimal quantity, the government should implement a corrective (tax/subsidy)
. This means that the government will (lose/gain)
welfare.
True/False
After the government's corrective policy in the market:
Consumer Surplus=A+B+E.
Producer Surplus=B+C+D+E+F+G
There is a total gain in the private market welfare due to the government intervention.
Transcribed Image Text:QUESTION 7 Consider this following graph Private Cost A P2- В PMarket F C P D Social Benefit 'D (private benefit) QMARKET QOPTIMUM Q The DWL is equivalent to area In order achieve the optimal quantity, the government should implement a corrective (tax/subsidy) . This means that the government will (lose/gain) welfare. True/False After the government's corrective policy in the market: Consumer Surplus=A+B+E. Producer Surplus=B+C+D+E+F+G There is a total gain in the private market welfare due to the government intervention.
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