If some activity creates positive externalities as well as private benefits,then economic theory suggests that the activity ought to be:
A) taxed.
B) prohibited.
C) subsidized.
D) left alone under the idea of laissez faire.

Question

Quizplus · Accepted Answer

Subsidized. When an activity creates positive externalities, it produces benefits beyond the individual participants, which are not reflected in the private market price. Subsidizing the activity will lower the cost for individuals and encourage more participation, which will lead to a socially efficient outcome.

If Some Activity Creates Positive Externalities as Well as Private