If the production of a good generates external ________, the government could increase efficiency by ________ production of the good.
A) benefits; taxing
B) benefits; subsidizing
C) costs; subsidizing
D) costs; increasing

Question

Quizplus · Accepted Answer

When a good's production generates external benefits (positive externalities), subsidizing its production can increase efficiency by encouraging more of its production, thus aligning private and social benefits.

If the Production of a Good Generates External ________, the Government