When the Government Uses a Subsidy in the Case of a Positive

question 51

Multiple Choice

When the government uses a subsidy in the case of a positive externality, it sets the subsidy equal to the

• A)product of the marginal social benefit and the private benefit of the good providing the externality.
• B)difference between the marginal private benefit and the marginal social benefit of the good providing the externality.
• C)sum of the marginal social benefit and the private benefit of the good providing the externality.
• D)difference between the marginal social benefit and the marginal private benefit of the good providing the externality.
• E)difference between the marginal social benefit and the marginal social cost of the good providing the externality.

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