If a good has an external benefit, efficiency can be achieved by
A) leaving the market unregulated.
B) monopolizing the market.
C) offering a private subsidy on the good equal to the external benefit.
D) imposing a tax on the good equal to the external benefit.

Question

Quizplus · Accepted Answer

Efficiency can be achieved by offering a private subsidy on the good equal to the external benefit because it encourages more production and consumption of the good, aligning private incentives with social benefits.

If a Good Has an External Benefit, Efficiency Can Be