Suppose the production of roses generates a positive externality in that travelers enjoy the scenic rural vistas.An appropriate government policy yielding the efficient outcome would be a:
A)Pigouvian tax.
B)Pigouvian subsidy.
C)system of rose production permits.
D)reduction in transaction costs.

Question

Quizplus · Accepted Answer

A Pigouvian subsidy would increase the supply of roses, leading to more scenic rural vistas and a greater overall benefit to society. A Pigouvian tax, on the other hand, would decrease the supply of roses and reduce the external benefit. A system of rose production permits or reduction in transaction costs would not directly address the positive externality and may not lead to an efficient outcome.

Suppose the Production of Roses Generates a Positive Externality in That