With technology spillover,to ensure that the market equilibrium equals the social optimum,what should government do
A)It should impose a tax greater than the value of the technology spillover.
B)It should not allow production of any product that causes a technology spillover.
C)It should provide a subsidy equal to the value of the technology spillover.
D)It should reward those who benefit from the spillover.

Question

Quizplus · Accepted Answer

The government should provide a subsidy equal to the value of the technology spillover to incentivize firms to produce more and maximize the social benefits. By doing so, the market equilibrium will be closer to the social optimum. A tax greater than the value of the technology spillover would discourage firms from producing and may reduce overall welfare. Not allowing production of any product that causes a technology spillover would prevent potential benefits from being realized. Rewarding those who benefit from the spillover may lead to inefficiencies and does not directly address the market failure caused by the spillover.

With Technology Spillover,to Ensure That the Market Equilibrium Equals the Social