The government can overcome the inefficiency created by a good with an external benefit by using
A) public provision.
B) marketable permits.
C) taxes.
D) emission charges.
E) None of the above answers is correct.

Question

Quizplus · Accepted Answer

Public provision is the best way for the government to overcome the inefficiency created by a good with an external benefit. This is because a good with an external benefit will be underproduced by the market as the market doesn't consider the social benefits of the good. Public provision allows the government to provide the good to those who would otherwise have not been able to afford it or access it, and thus ensures that the social benefits are fully accounted for. This eliminates the inefficiency created by the market. Marketable permits and taxes are methods used to overcome negative externalities, while emission charges are used to control environmental pollution.

The Government Can Overcome the Inefficiency Created by a Good