Which of the following might be a method that the government could use to correct a negative externality?
A) an effluent fee on waste from the production of goods that create negative externalities
B) government subsidies to producers of goods that create negative externalities
C) financing additional production of goods that create negative externalities
D) encouraging overallocation of resources of production of goods that create negative externalities

Question

Quizplus · Accepted Answer

An effluent fee or tax would increase the cost of production for goods that create negative externalities, thus reducing their supply and demand, and potentially leading to a shift towards alternative, less harmful production methods. Government subsidies and financing further production of such goods would likely exacerbate the negative externality problem, while encouraging overallocation of resources towards such goods would also worsen the situation.

Which of the Following Might Be a Method That the Government