Suppose that the consumption of a good involves a positive externality. Which of the following actions by the government can lead to the purchase of a socially optimal quantity?

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Quizplus · Accepted Answer

When a good has a positive externality, it means that its consumption benefits third parties who are not directly involved in the transaction. To reach the socially optimal quantity, the government can encourage more consumption of the good. Imposing taxes would discourage consumption or production, while quotas limit the amount that can be bought. Therefore, passing a regulation that mandates a minimum purchase amount can help increase consumption to a level that reflects the true social value of the good, addressing the externality positively.

Suppose That the Consumption of a Good Involves a Positive