To ensure the market reaches the socially optimal equilibrium in presence of a technology spillover,the government should subsidize producers by
A)imposing a corrective tax.
B)an amount equal to the value of the technology spillover
C)helping those companies that are adversely affected by the new technology.
D)transferring income to the poor by offering them free technology.

Question

Quizplus · Accepted Answer

Subsidizing producers by an amount equal to the value of the technology spillover would incentivize them to produce more, as they would be able to capture the full social benefit of their output, including the positive externalities from the technology spillover. This would lead to an increase in production and consumption, leading to the socially optimal equilibrium. Imposing a corrective tax would decrease production and consumption, while helping adversely affected companies or providing free technology to the poor would not directly address the problem of achieving the socially optimal equilibrium in the presence of technology spillovers.

To Ensure the Market Reaches the Socially Optimal Equilibrium in Presence