Refer to Figure 10-9. Panel (b) and Panel (c). Which of the following is correct

Question

Refer to Figure 10-9. Panel (b) and Panel (c). Which of the following is correct? A subsidy would move the market in Panel (b) closer to the socially optimal outcome, but a tax would move the market in Panel (c) closer to the socially optimal outcome. A tax would move the market in Panel (b) closer to the socially optimal outcome, but a subsidy would move the market in Panel (c) closer to the socially optimal outcome. A subsidy would move the market in Panel (b) and the market in Panel (c) closer to the socially optimal outcome. A tax would move the market in Panel (b) and the market in Panel (c) closer to the socially optimal outcome.

Explanation / Answer

the correct answer is C a subsidy would move the market in panel (b) and the market in panel (c) closer to the social optimal income

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