If a good has an external benefit, efficiency can be achieved by
A) leaving the market unregulated.
B) monopolising the market.
C) imposing a tax on the good equal to the external benefit.
D) offering a private subsidy on the good equal to the external benefit.

Question

Quizplus · Accepted Answer

When a good has an external benefit, efficiency can be achieved by offering a subsidy equal to the external benefit. This aligns the private cost with the social cost, encouraging the optimal level of production and consumption.

If a Good Has an External Benefit, Efficiency Can Be