The government can intervene to achieve the socially optimal quantity of a common resource by:

Question

Quizplus · Accepted Answer

All the options provided are effective ways for the government to intervene to achieve socially optimal quantity of a common resource.

Assigning property rights involves giving control of the resource to private individuals or firms, who can then use it in a way that maximizes their own income while taking into account the cost of using up the resource.

Imposing a tax on usage increases the cost of using the resource, which reduces demand and incentivizes users to find alternative solutions or use the resource more efficiently.

Granting a limited number of tradable permits to use the good creates a market for the permits and incentivizes users to find efficient ways to use the permits or buy more on the market if they need more.

Therefore, a combination of these interventions can help achieve the socially optimal quantity of a common resource.

The Government Can Intervene to Achieve the Socially Optimal Quantity