Beatrice loves to work in her magnolia garden, which provides pleasure to everyone in her neighborhood. To improve social welfare, the government could _____ Beatrice's gardening activities, since the market quantity of magnolias is _____ than the socially optimal quantity.

Question

Quizplus · Accepted Answer

Subsidizing Beatrice's gardening activities would encourage more production of magnolias, addressing the issue that the current market quantity is less than the socially optimal quantity. This is because her gardening provides external benefits to her neighborhood that are not fully captured in the market.

Beatrice Loves to Work in Her Magnolia Garden, Which Provides