Scenario: the Production of a Good Creates a Negative Externality

Multiple Choice

Scenario: The production of a good creates a negative externality. The following figure shows the market for this good.

-Refer to the scenario above.To restore the socially optimal outcome in this market,the government should ________.

A) levy a $6 tax per unit on this good
B) levy a $10 tax per unit on this good
C) pay a $6 subsidy per unit on this good
D) not intervene in the market, as the market will provide the socially optimal outcome by itself