If production of a good produces an external benefit, in order for the marginal social cost to equal the marginal social benefit,
A) the good could be subsidised.
B) the good should be taxed.
C) permits should be required to purchase the good.
D) the government needs to take no action.

Question

Quizplus · Accepted Answer

When a good produces an external benefit, subsidizing its production can help align the marginal social cost with the marginal social benefit, encouraging more production and consumption of the good to achieve a socially optimal level.

If Production of a Good Produces an External Benefit, in Order