A Pigouvian subsidy leads to a socially efficient outcome by ________.
A) raising individuals' marginal benefit from consumption
B) lowering firms' marginal private cost of production
C) lowering individuals' marginal benefit from consumption
D) lowering firms' marginal external cost of production

Question

Quizplus · Accepted Answer

A Pigouvian subsidy is designed to increase the marginal benefit of consumption for individuals, thereby encouraging more consumption of goods that have positive externalities, leading to a socially efficient outcome.

A Pigouvian Subsidy Leads to a Socially Efficient Outcome by ________