Question

* Which of the following policies would move the market from the market equilibrium to the socially optimal equilibrium?

a) A price ceiling
b) A tax on producers
c) A subsidy to consumers
d) A quota on production

Answer 1

A subsidy to consumers is the policy that would move the market from the market equilibrium to the socially optimal equilibrium.

Step-by-step explanation:

The policy that would move the market from the market equilibrium to the socially optimal equilibrium is c) A subsidy to consumers.

A subsidy to consumers is a government policy where the government provides financial assistance or benefits to consumers in a particular market. This can be in the form of vouchers or direct payments. By providing a subsidy to consumers, the price that consumers pay for a good or service is reduced, which can increase demand and lead to a higher quantity exchanged in the market. This shift can move the market from the market equilibrium to the socially optimal equilibrium where the marginal social benefit (MSB) equals the marginal social cost (MSC).