For a Government Subsidy on a Good with an External

question 56

Multiple Choice

For a government subsidy on a good with an external benefit to result in the efficient amount of output being produced, what must be done?

• A) Private production and private consumption must both be directly subsidised.
• B) The quantity demanded must be decreased to the efficient amount.
• C) The government must produce the product.
• D) Private production without the subsidy must be prohibited.
• E) The size of marginal external benefit must be accurately determined.

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Definitions:

Directive Leadership

A leadership style characterized by the leader giving clear and specific commands and expecting immediate compliance from subordinates.

Supportive Leadership

Leadership style characterized by providing encouragement, empowerment, and professional support to employees.

Social Value

The total benefit to society from producing or providing a good or service, including both private benefits and any external benefits to the wider community.

Subsidy

Financial assistance granted by the government to support or lower the cost of goods and services.