Hi there, I am looking for help with this Microeconomics question, thanks for yo

Question

Hi there, I am looking for help with this Microeconomics question, thanks for your help.

Part 1: Use the diagram above. Leaving the free market to decide on production, output would be _____ units and price would be _____ per unit.

A. 120; $1.00

B. 120; $0.90

C. 100; $0.90

D. 100; $1.00

E. 100; $1.40

Part 2: Use the diagram above. The vertical distance between the private MC and the social MC represents

A. excess demand due to prices set too high

B. excess demand due to prices set too low

C. the per-unit external cost of production not picked up by the producing firm

D. the per-unit external cost of production picked up by the consumers

E. the per-unit external cost of production picked up by the government in the form of taxes

Part 3: Use the diagram above. With the appropriate tax rate imposed on producers, the socially efficient level of output would be _____ units at the socially efficient price of _____ per unit.

A. 100; $1.30

B. 100; $0.90

C. 100; $1.50

D. 120; $1.00

E. 120; $1.40

Explanation / Answer

1. A. 120; $1.00

2. E. the per-unit external cost of production picked up by the government in the form of taxes

3. A. 100; $1.30

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