Government should subsidize a product whose consumption results in spillover costs in order to achieve the optimal level of output.

Name: Government should subsidize a product whose consumption results in spillover costs in order to achieve the optimal level of output.
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Question

Quizplus · Accepted Answer

Subsidizing a product with spillover costs would increase its consumption, worsening the negative externalities. Instead, the government should tax such products to reduce consumption and achieve optimal output.

Government Should Subsidize a Product Whose Consumption Results in Spillover