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What the efficient equilibrium could be achieved by

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Problem 1: Suppose S is the (upward-sloping) private supply curve and S1 is the social supply curve that includes the negative external cost (also upward-sloping). Assume that a Coase Theorem solution (private negotiation) is impractical. The efficient equilibrium could be achieved by:

Select one:

a. banning production of the good.

b. compensating those injured by the externality.

c. taxing the good by an amount equal to the external cost at the optimal level of output.

d. subsidising the good by an amount equal to the external benefit.

Reference no: EM132914986

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