If production of a good produces an external benefit, in order for the marginal social cost to equal the marginal social benefit
A) the good should be taxed.
B) permits should be required to purchase the good.
C) the good could be subsidized.
D) the government needs to take no action.

Question

Quizplus · Accepted Answer

Subsidizing the good can help internalize the external benefit, aligning the marginal social cost with the marginal social benefit by encouraging more production and consumption of the good.

If Production of a Good Produces an External Benefit, in Order