If the production of a particular good involves significant external benefits, to force the externality to be internalized the government might:
A)impose a tax on production of the good in order to increase production.
B)impose a tax on production of the good in order to decrease production.
C)offer a subsidy for production of the good in order to increase production.
D)offer a subsidy for production of the good in order to decrease production.

Question

If the production of a particular good involves significant external benefits, to force the externality to be internalized the government might:
A)​impose a tax on production of the good in order to increase production.
B)​impose a tax on production of the good in order to decrease production.
C)​offer a subsidy for production of the good in order to increase production.
D)​offer a subsidy for production of the good in order to decrease production.

Quizplus · Accepted Answer

When a good's production involves significant external benefits (positive externalities), offering a subsidy can encourage more production. This aligns the private cost to the social cost, effectively internalizing the externality.

If the Production of a Particular Good Involves Significant External