The problem of positive externalities can be addressed by having some firms exit the industry.

Question

Quizplus · Accepted Answer

Positive externalities occur when a third party benefits from a transaction they are not involved in. Encouraging firms to exit the industry would reduce the positive spillover effects, not address the problem. Instead, subsidies or incentives are typically used to encourage more production of goods with positive externalities.

The Problem of Positive Externalities Can Be Addressed by Having