The government can correct externalities by imposing taxes on products with negative externalities and subsidies on products with positive externalities.

Question

Quizplus · Accepted Answer

The government can impose taxes on goods or services that generate negative externalities (such as pollution) to discourage their production or consumption, and provide subsidies for those with positive externalities (like education or vaccinations) to encourage their production or consumption, thereby correcting market failures associated with externalities.

The Government Can Correct Externalities by Imposing Taxes on Products