Governments can increase the consumption of a product that creates positive externalities by
A) subsidizing the production of the product so that the supply is increased and market price is reduced.
B) taxing the production and consumption of the product.
C) convincing everyone to consume the good.
D) assigning property rights to the producers of the product.

Question

Quizplus · Accepted Answer

By subsidizing production of the product, supply will increase and the market price will decrease, incentivizing consumers to purchase more of the product. This will lead to an increase in consumption of the product and a greater realization of the positive externalities associated with it. This approach is preferable to taxing the production and consumption of the good, as taxes may discourage consumption and result in reduced welfare. Convincing everyone to consume the good might not be feasible, and assigning property rights may not necessarily increase consumption in the absence of other incentives.

Governments Can Increase the Consumption of a Product That Creates