One way to make consumers take a positive externality into account in their demand decision is to:
A) place a tax on the item.
B) subsidize the purchase of the item.
C) tax the producers of the item.
D) None of these statements is true.

Question

Quizplus · Accepted Answer

By subsidizing the purchase of the item, the cost to the consumer is reduced, incentivizing them to consider the positive externality in their demand decision. This can lead to an increase in the consumption of the item, resulting in greater benefits for society as a whole. Placing a tax on the item or taxing the producers would increase the cost to the consumer and may discourage consumption, which could be counterproductive to achieving the goal of incorporating the positive externality into the consumption decision.

One Way to Make Consumers Take a Positive Externality into Account