Which of the following policies is the government most inclined to use when faced with a positive externality?
A)taxation
B)permits
C)subsidies
D)usage fees

Question

Quizplus · Accepted Answer

When the government is faced with a positive externality, such as the benefits received by society which are not reflected in market prices, it may use subsidies to incentivize the production or consumption of the good. By doing so, the government seeks to encourage the positive externality by reducing the cost of producing or consuming that good.

Which of the Following Policies Is the Government Most Inclined