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Figure 7: Demand and supply of hats 600 500 400 300 MPC 200 -MSC p = 340 100 - -460 --:260 10 20 30 40

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Figure 7: Demand and supply of hats 600 500 400 300 MPC 200 -MSC p = 340 100 - -460 --:260 10 20 30 40 50 60 70 80 90 100 110 120 130 140 Output (Q) I The robot market is competitive and the market price is $340. Based on this information, which of the following statements is correct? (a) The efficient level of output is 120 where the factory is profit-maximising. (b) The efficient level of output is 0 where there is zero marginal external cost. (c) Social welfare would increase by paying a subsidy of less than 80 per unit to increase output

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