Who gains surplus when consumers in a market are given a Pigouvian subsidy for a positive externality?
A) Consumers
B) Producers
C) Others affected by the externality
D) Both consumers and producers gain surplus.

Question

Quizplus · Accepted Answer

A Pigouvian subsidy increases the quantity of the good produced and consumed, benefiting both consumers and producers by lowering prices for consumers and increasing sales for producers.

Who Gains Surplus When Consumers in a Market Are Given