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-(Table: Externalities from Parks) The table Externalities from Parks shows the marginal social benefit and the marginal social cost of preserving various amounts of land in a city for a public park. If the government wants to achieve the optimum amount of land for the park, it could use a Pigouvian _____ of _____.
A) tax; $300
B) tax; $150
C) subsidy; $150
D) subsidy; $450

Question

Use the following to answer questions: 
-(Table: Externalities from Parks) The table Externalities from Parks shows the marginal social benefit and the marginal social cost of preserving various amounts of land in a city for a public park. If the government wants to achieve the optimum amount of land for the park, it could use a Pigouvian _____ of _____.
A) tax; $300 
B) tax; $150 
C) subsidy; $150 
D) subsidy; $450

Quizplus · Accepted Answer

A Pigouvian subsidy of $150 would encourage the preservation of the optimal amount of land by covering the difference between the marginal social benefit and the marginal social cost.

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