Refer to the figure below.To correct the externality problem,the government could

Question

Quizplus · Accepted Answer

To correct the negative externality caused by the production of the good, the government can impose a tax on the producers to make their costs higher and reduce the production of the good, which will help reduce the negative externality. A subsidy or providing incentives for producers to produce more would only exacerbate the externality problem, while producing the good itself or encouraging buyers to buy more of the good may not be effective solutions.

Refer to the Figure Below