To internalize a positive externality an appropriate public policy response would be to ?
Correct answer: C. subsidize the good
- A. ban the good creating the externality
- B. tax the good
- C. subsidize the good
- D. have the government produce the good until the value of an additional unit is zero
Explanation
A subsidy lowers the private cost or raises the private benefit of an activity with external benefits, moving market output toward the socially efficient level. Taxing or banning the good would reduce an activity that society wants more of.
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