If the government wanted to ensure that the market reaches the social optimum in the presence of a technology spillover,what should it do
A)It should impose a corrective tax on any firm producing a technology spillover.
B)It should offer tax credits to consumers who are adversely affected by the new technology.
C)It should subsidize producers by an amount equal to the value of the technology spillover.
D)It should provide research grants to those firms not currently engaging in research to increase competition in the industry.

Question

Quizplus · Accepted Answer

By subsidizing producers by an amount equal to the value of the technology spillover, the government can increase the quantity of the good produced while also capturing the benefits of the technology spillover. This would help to ensure that the market reaches the social optimum by providing an incentive for firms to produce more of the good and allowing consumers to benefit from the new technology at a lower cost. Imposing a corrective tax or providing tax credits to consumers would not necessarily lead to the social optimum because it may not incentivize firms to produce more of the good. Providing research grants to firms may increase competition in the industry but does not directly address the technology spillover issue.

If the Government Wanted to Ensure That the Market Reaches