Which policy does the economics of externalities suggest would encourage an efficient quantity in the corresponding market?
A) subsidizing polluting factories
B) subsidizing beautiful flower beds in public spaces
C) taxing convenient benches set up in public spaces
D) taxing healthy food

Question

Quizplus · Accepted Answer

The economics of externalities suggests that a tax or subsidy can be used to encourage an efficient quantity in the corresponding market. In the case of negative externality, such as pollution from factories, taxation could be implemented to reduce production and encourage companies to adopt cleaner methods. In the case of positive externalities, such as beautiful flower beds in public spaces, subsidy could be implemented to encourage the production and maintenance of such spaces. Option B suggests subsidizing beautiful flower beds, which aligns with the economics of externalities.

Which Policy Does the Economics of Externalities Suggest Would Encourage