When positive externalities exist in a market, if a subsidy is imposed:
A)those who interact in the market will lose surplus.
B)those who interact in the market will gain surplus.
C)those who do not interact in the market, but are affected by the externality, will gain surplus.
D)None of these are necessarily true.

Question

Quizplus · Accepted Answer

A subsidy can help internalize the positive externality, leading to increased production and consumption, which can increase the surplus for those interacting in the market.

When Positive Externalities Exist in a Market, If a Subsidy