Positive externalities can be dealt with by _____ them.
A)subsidizing
B)taxing
C)regulating
D)encouraging

Question

Quizplus · Accepted Answer

Positive externalities refer to benefits that spill over to parties other than the ones directly involved in a market transaction. These externalities are not accounted for in the market price, and hence, the quantity of the positive externality would be lower than the social optimum level.

By subsidizing positive externalities, the government can encourage more private provision of the good or service associated with the positive externality. Subsidies act as a payment to the producer to increase output and hence social benefit. Through this action, the government can increase the quantity supplied of a good or service, which in turn will increase social welfare.

Positive Externalities Can Be Dealt with by _____ Them