Where there are spillover (or external) beneﬁts from having a particular product in a society, the government can make the quantity of the product approach the socially optimal level by doing the
Following, except
A) subsiding the buyers of the product.
B) taxing the sellers of the product.
C) subsidizing the sellers of the product.
D) providing the product itself.

Question

Quizplus · Accepted Answer

By taxing the sellers of the product, it will increase the cost of production, thus reducing the quantity of the product supplied in the market. This will lead to an increase in its price, ultimately causing a decrease in the demand for the product. This approach is called a Pigouvian tax, and it is usually used as a corrective measure to control negative externalities, such as pollution. The other options, (A) subsidizing the buyers of the product, (C) subsidizing the sellers of the product, and (D) providing the product itself, are all methods that the government can use to increase the quantity of a socially beneficial product in the market. These measures are used to address positive externalities, such as education or public health programs.

Where There Are Spillover (Or External) Beneﬁts from Having a Particular