In order to increase society's well-being,a production process that generates a positive externality should be _____
A)taxed to discourage production.
B)subsidized to encourage production.
C)taxed to encourage production.
D)subsidized to discourage production.
E)continued without government intervention.

Question

Quizplus · Accepted Answer

A production process that generates a positive externality benefits society as a whole. However, since the producer is not capturing the full benefit of their actions, they may decide to produce less than what is socially optimal. By subsidizing the production process, the government can incentivize producers to increase production to the socially optimal level, leading to a higher level of well-being for society.

In Order to Increase Society's Well-Being,a Production Process That Generates