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(a) Draw a correctly labeled graph of the market for good X and show each of the following.
(i) The marginal private cost and marginal social cost of good X, labeled MPC and MSC, respectively
(ii) The market quantity, labeled Qm
(iii) The allocatively efficient quantity, labeled Qs
(iv) The area of deadweight loss, shaded completely
(b) Assume that a lump-sum tax is imposed on the producers of good X. What happens to the deadweight loss?
END OF EXAM © 2011 The College Board.
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