Which of the following is the government most likely to subsidies ?
Correct answer: B. Positive externalities
- A. Negative externalies
- B. Positive externalities
- C. Monopolies
- D. Oligopolies
Explanation
Positive externalities create benefits for third parties that private buyers and sellers do not fully consider, so subsidies encourage more of the beneficial activity. Negative externalities generally call for taxes or regulation instead.
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About Public Finance
Government revenue and expenditure are analysed through taxation, public borrowing, budgets, subsidies, transfers and public debt. The topic explains how fiscal policy affects resource allocation, income distribution, economic stability and growth, while distinguishing direct from indirect taxes, progressive from regressive taxation, and public goods from goods supplied by private markets.
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