Activities that provide external benefits

Question

Quizplus · Accepted Answer

Activities that provide external benefits should be subsidized by the government to give decision makers an incentive to consider increasing their consumption. This helps to promote the efficient allocation of resources and encourages the production of goods and services that produce external benefits. Taxing them would make them more expensive and discourage people from consuming them. Simply ignoring the external benefits would result in an inefficient allocation of resources.

Activities That Provide External Benefits