Suppose Planting Flowering Shrubs Creates a Positive Externality Equal to $7

question 502

Multiple Choice

Suppose planting flowering shrubs creates a positive externality equal to $7 per shrub. Further suppose that the local government offers a $7 per-shrub subsidy to planters. The number of shrubs that are planted is then

• A)less than the socially optimal quantity.
• B)greater than the socially optimal quantity.
• C)equal to the socially optimal quantity.
• D)There is not enough information to answer the question.

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Definitions:

Hypothesis

An initial theory put forward with partial evidence to guide subsequent research.

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