In order to increase a society's total welfare,a production process that produces a negative externality should be _____
A)taxed.
B)encouraged to produce goods in excess of the socially optimum level.
C)encouraged to produce in excess of the private optimum level.
D)subsidized if the good is produced for foreign markets.
E)subsidized if the good is produced for the domestic market.

Question

Quizplus · Accepted Answer

The production process that produces a negative externality should be taxed in order to encourage the firm to take into account the full social cost of production which will ultimately lead to a reduction in the quantity produced and an increase in total welfare.

In Order to Increase a Society's Total Welfare,a Production Process