By allowing an income-tax deduction for charitable contributions, the government
A)encourages a private solution to a particular positive-externality problem.
B)discourages a private solution to a particular positive-externality problem.
C)encourages a private solution to a particular negative-externality problem.
D)discourages a private solution to a particular negative-externality problem.

Question

Quizplus · Accepted Answer

By allowing an income-tax deduction for charitable contributions, the government is encouraging individuals to donate to charities and nonprofits, which in turn can provide goods and services that have positive externalities (such as education or healthcare). This is an example of the government promoting a private solution to a positive-externality problem.

By Allowing an Income-Tax Deduction for Charitable Contributions, the Government