Use the following to answer question:
-(Table: Externalities from Parks)Use: Table: Externalities from Parks.The table shows the marginal social benefit and the marginal social cost of preserving various amounts of land in a city for a public park.Suppose that parks result in positive benefits to the community as a whole but that the marginal private benefit that any one individual in the community gets from parks is close to 0.If the government wants to achieve the optimum amount of land for the park,it could use a Pigouvian _____ of _____ per park acre.
A)tax;$300
B)tax;$150
C)subsidy;$150
D)subsidy;$450

Question

Use the following to answer question: 
-(Table: Externalities from Parks)Use: Table: Externalities from Parks.The table shows the marginal social benefit and the marginal social cost of preserving various amounts of land in a city for a public park.Suppose that parks result in positive benefits to the community as a whole but that the marginal private benefit that any one individual in the community gets from parks is close to 0.If the government wants to achieve the optimum amount of land for the park,it could use a Pigouvian _____ of _____ per park acre.
A)tax;$300 
B)tax;$150 
C)subsidy;$150 
D)subsidy;$450

Quizplus · Accepted Answer

Since parks provide positive externalities (benefits to the community not captured by the market), a Pigouvian subsidy is appropriate to encourage the optimal level of park land. The subsidy amount would bridge the gap between the marginal social benefit and the marginal private benefit, which is close to 0.

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