S, S2 D2 Di Quantity Refer to the competitive market diagram for product Z. Assume that the current market demand and supply curves for Z are D2 and S2. If there are substantial external benefits associated with the production of Z, then efficient resource allocation occurs at output G and price B because the market mechanism does not measure all benefits. an output greater than G would result in a more efficient allocation of resources. government should levy a per-unit excise tax on Z to shift the demand curve toward Dq. an output smaller than G would improve resource allocation. Price

S, S2 D2 Di Quantity Refer to the competitive market diagram for product Z. Assume that the current market demand and supply curves for Z are D2 and S2. If there are substantial external benefits associated with the production of Z, then efficient resource allocation occurs at output G and price B because the market mechanism does not measure all benefits. an output greater than G would result in a more efficient allocation of resources. government should levy a per-unit excise tax on Z to shift the demand curve toward Dq. an output smaller than G would improve resource allocation. Price

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter19: Externalities And Public Goods

Section: Chapter Questions

Problem 19.9P

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