In order to increase a society's total welfare, a production process that produces a negative externality should be _____.
A)taxed
B)encouraged to produce goods in excess of the socially optimum level
C)prohibited
D)subsidized if the good is produced for foreign markets
E)subsidized if the good is produced for the domestic market

Question

In order to increase a society's total welfare, a production process that produces a negative externality should be _____.​
A)taxed
B)encouraged to produce goods in excess of the socially optimum level​
C)prohibited​
D)subsidized if the good is produced for foreign markets​
E)subsidized if the good is produced for the domestic market​

Quizplus · Accepted Answer

Taxing the production process that produces a negative externality is the best choice to increase society's total welfare. This is because a tax on negative externalities serves as a penalty for the producers and creates an incentive for them to reduce their production levels. This would reduce the negative externalities associated with the production process, resulting in a welfare gain for society.

In Order to Increase a Society's Total Welfare, a Production