When pollution (a negative externality)is created by firms,which of the following is NOT a valid way for the government to restore the social optimum?

Question

Quizplus · Accepted Answer

Offering a subsidy to firms to reduce their production costs does not directly address the issue of pollution and does not create an incentive for firms to reduce their emissions. Instead, it may even result in an increase in production and thus more pollution without mitigating the negative externality. The other choices, A through D, all directly address the issue of pollution and create incentives for firms to reduce emissions or pay for the environmental damage they create, thus helping restore the social optimum.

When Pollution (A Negative Externality)is Created by Firms,which of the Following