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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Definitions:

Sole Proprietorship

A business structure where a single individual both owns and runs the company, bearing unlimited personal liability for its debts.

Unlimited Liability

A business structure where the owners are personally responsible for all of the company's debts and liabilities.

Business License

A legal authorization to operate a business in a particular municipality, region, or country, often requiring renewal and compliance with specific regulations.

Primary Market Transactions

The issuance and sale of securities directly from the issuer to investors, as opposed to trading between investors in the secondary market.