Latoya R.

asked • 12/11/19

 To otherwise competitive markets, taxes and subsidies are?

1.     To otherwise competitive markets, taxes and subsidies are?

a.     Inefficient

b.     Efficient 

c.     Never a good thing

d.     Always a good thing 


1 Expert Answer

By:

Lenny D. answered • 12/12/19

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Former Tufts Economics Professor and Wall Street Economist

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A competitive market has Price = Marginal Cost. Or Marginal bent= Marginal Cost. This is the golden rule of Optimization (you cant do any better. Taxes and Subsidies create a distortion (drive a wedge between P and MC) this is INEFFICIENT

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