To correct for the underproduction of products with positive externalities, the government must
A) provide the incentives for the private sector to produce and consume the good.
B) provide tougher regulations on the industry.
C) increase taxes on the industry.
D) fine the industry.

Question

Quizplus · Accepted Answer

Providing incentives for the private sector, such as subsidies or tax breaks, can encourage them to produce goods with positive externalities. This approach is more efficient and less intrusive than using regulations, taxes, or fines to force the industry to comply.

To Correct for the Underproduction of Products with Positive Externalities