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Figure: City with Two Polluters
-Betsy loves to garden,and her rose garden is enjoyed by everyone in her neighbourhood.Because her consumption of rosebushes provides a positive externality to the community,the government should _____ because the market quantity of rosebushes is _____ than the socially optimal quantity.
A) provide a subsidy;greater
B) impose a tax;lower
C) provide a subsidy;lower
D) impose a tax;greater

Question

Use the following to answer questions :
Figure: City with Two Polluters 
-Betsy loves to garden,and her rose garden is enjoyed by everyone in her neighbourhood.Because her consumption of rosebushes provides a positive externality to the community,the government should _____ because the market quantity of rosebushes is _____ than the socially optimal quantity.
A) provide a subsidy;greater 
B) impose a tax;lower 
C) provide a subsidy;lower 
D) impose a tax;greater

Quizplus · Accepted Answer

The government should provide a subsidy because the positive externality means the market quantity of rosebushes is lower than the socially optimal quantity.

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