To encourage consumption of a good that generates positive externalities,the BEST option for policymakers would be to:
A)impose a tax on the amount consumed to achieve the socially optimal level.
B)mandate consumption of the good at the socially optimal level.
C)provide a subsidy per unit of the good consumed to achieve the socially optimal level.
D)do nothing since the market will achieve the socially optimal level without government intervention.

Question

Quizplus · Accepted Answer

A subsidy would increase the consumption of a good with positive externalities, leading to a larger social benefit than the private benefit to consumers. This can help to achieve the socially optimal level of consumption without distortionary effects such as a tax or mandate.

To Encourage Consumption of a Good That Generates Positive Externalities,the