Who gains surplus when consumers in a market are given a subsidy for a positive externality?
A)Consumers
B)Producers
C)Others affected by the externality
D)Both consumers and producers gain surplus.

Question

Quizplus · Accepted Answer

Both consumers and producers gain surplus from a subsidy for a positive externality. Consumers benefit from a lower effective price, increasing their consumer surplus, while producers receive a higher effective price for their product, increasing their producer surplus.

Who Gains Surplus When Consumers in a Market Are Given