Imagine a market where there is a positive externality in consumption. The private inverse demand function for the good is: D_private: P_D = 12 - Q_D. The social inverse demand function that incorporates the positive externality is: D_social: P_D = 24-Q_D. The social (and private) inverse supply function is: S_social: P_S = 3 + Q_S. A_ would eliminate the deadweight loss from the externality, which equals Select one: a. $12 per unit subsidy; $18. b. $12 per unit subsidy; $36. c. $12 per unit tax; $36. d. $6 per unit subsidy; $18. e. $12 per unit tax; $18.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Imagine a market where there is a positive externality in consumption. The private inverse demand
function for the good is:
D_private: P_D = 12 - Q_D.
The social inverse demand function that incorporates the positive externality is:
D_social: P_D = 24 - Q_D.
The social (and private) inverse supply function is:
S_social: P_S = 3 + Q_S.
A
would eliminate the deadweight loss from the externality, which equals
Select one:
a. $12 per unit subsidy; $18.
b. $12 per unit subsidy; $36.
c. $12 per unit tax; $36.
d. $6 per unit subsidy; $18.
e. $12 per unit tax; $18.
Transcribed Image Text:Imagine a market where there is a positive externality in consumption. The private inverse demand function for the good is: D_private: P_D = 12 - Q_D. The social inverse demand function that incorporates the positive externality is: D_social: P_D = 24 - Q_D. The social (and private) inverse supply function is: S_social: P_S = 3 + Q_S. A would eliminate the deadweight loss from the externality, which equals Select one: a. $12 per unit subsidy; $18. b. $12 per unit subsidy; $36. c. $12 per unit tax; $36. d. $6 per unit subsidy; $18. e. $12 per unit tax; $18.
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