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Suppose that there is a positive externality in the market for pizza rolls. The graph below shows the supply(red) and demand(blue) curves for pizza rolls. It also shows the social value(green) curve when there is a marginal benefit.

Respuesta :

azikennamdi

This is about positive externality. From the information given (in the attached),

  • The Market equilibrium is 3 pizza rolls
  • The Market price is  $7
  • The Optimal Quantity is 5 pizza rolls

What should the government do in order to ensure that the market produces at optimal efficiency?

In order to ensure that the market produces at optimal efficiency, the government must Impose corrective subsidies.

How big should the subsidies be?

Subsidy = 11-7

= $4

As a result of the positive externality of the market produced the optimal amount. (Option B)

What is positive externality?

A positive externality occurs when a benefit is passed on to a third party.

Negative externalities can be discouraged by charging goods and services that cause spillover costs.

Learn more about positive externality at;
https://brainly.com/question/477170
#SPJ1

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