Which policy is government most inclined to use when faced with a positive externality
A)taxation
B)permits
C)subsidies
D)usage fees

Question

Quizplus · Accepted Answer

When faced with a positive externality, the government is most inclined to use subsidies. This is because subsidies provide a financial incentive for individuals and firms to increase their production or consumption of the positively-affected good or service, thereby increasing the size of the positive externality. By contrast, taxation, permits, or usage fees would decrease the size of the positive externality, making them less suitable policy options.

Which Policy Is Government Most Inclined to Use When Faced