Question

To achieve the social optimum,the government could set a tax equal to ________ per unit sold.

A) $6
B) $4
C) $2
D) $3
E) $5

Answer 1

A) $6

Step-by-step explanation:

The equilibrium price arises when the marginal cost of private i.e. demand is $12 and when the social production cost is to be considered then the equilibrium price is $18

So, to accomplish the social optimum, the government should set a tax of

= $18 - $12

= $6

This shifted the private marginal cost to the left and there is yield to the social optimum

Hence, the correct option is A. $6