Answered

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To correct for positive externalities, the government should:_________
(A) do nothing, since no harm is done by positive externalities
(B) levy a tax on the output of the good or service
(C) pay a subsidy equal to the marginal external benefit
(D) impose a price ceiling on the good to discourage its production
(E) impose a price floor on the good at which the marginal private benefit equals the marginal social cost

Sagot :

Answer:

e

Explanation:

A good has positive externality if the benefits to third parties not involved in production is greater than the cost. an example of an activity that generates positive externality is research and development. Due to the high cost of R & D, they are usually under-produced. Government can encourage the production of activities that generate positive externality by granting subsidies.

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