In a certain city, the local government regulates the destruction of historic buildings and provides tax breaks to owners of historic buildings who restore them. These government policies
A)reflect the fact that restored historic buildings convey a positive externality.
B)reflect the fact that the destruction of historic buildings conveys a positive externality.
C)are likely to worsen the market failure that is associated with historic buildings and the restoration of such buildings.
D)are likely to decrease the well-being of society as a whole.

Question

Quizplus · Accepted Answer

The government policies of regulating the destruction of historic buildings and providing tax breaks to owners who restore them reflect the fact that restored historic buildings convey a positive externality. This means that the benefits of restoring historic buildings go beyond the private benefits enjoyed by individual property owners and spill over to the wider community. For example, restored historic buildings may enhance the aesthetic appeal of a neighborhood or city, create a sense of historical continuity, and attract tourism and business activity. Therefore, the government's policies aim to incentivize private property owners to undertake socially beneficial activities that they might not otherwise undertake due to the presence of a positive externality.

In a Certain City, the Local Government Regulates the Destruction