In a situation in which property rights are not well-defined and social costs exceed private costs, government can use all of the following to induce producers to bring private costs into alignment with social costs EXCEPT

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Subsidization of production will not incentivize producers to bring private costs into alignment with social costs. In fact, it may have the opposite effect by encouraging more production and potentially increasing social costs. The other options (taxing production, coercive limits on production, and regulation of production) can all be used by the government to align private costs with social costs.

In a Situation in Which Property Rights Are Not Well-Defined