A rain barrel is a container that captures and stores rainwater for landscape and garden use during dry periods. Rain barrels provide an external benefit to the community through water conservation. What can the government do to equate the equilibrium quantity of rain barrels and the socially optimal quantity of rain barrels?
A)impose a tax on rain barrels that is equal to the per-unit externality
B)offer a subsidy on rain barrels that is equal to the per-unit externality
C)encourage homeowners to bargain with rain barrel producers
D)nothing

Question

​A rain barrel is a container that captures and stores rainwater for landscape and garden use during dry periods. Rain barrels provide an external benefit to the community through water conservation. What can the government do to equate the equilibrium quantity of rain barrels and the socially optimal quantity of rain barrels?
A)​impose a tax on rain barrels that is equal to the per-unit externality
B)​offer a subsidy on rain barrels that is equal to the per-unit externality
C)​encourage homeowners to bargain with rain barrel producers
D)nothing​

Quizplus · Accepted Answer

Offering a subsidy on rain barrels that is equal to the per-unit externality would encourage more individuals to purchase and use rain barrels, leading to an increase in the socially optimal quantity. This would help to conserve water and provide a positive externality to the community. Imposing a tax on rain barrels or doing nothing would likely result in a suboptimal quantity of rain barrels being used, which would not address the externality issue. Encouraging homeowners to bargain with rain barrel producers may not be effective in achieving the socially optimal quantity, as it depends on the bargaining power of each individual and may not lead to a collective solution.

​A Rain Barrel Is a Container That Captures and Stores

A Rain Barrel Is a Container That Captures and Stores