In Order to Encourage Consumption of a Good That Generates

question 48

Multiple Choice

In order to encourage consumption of a good that generates positive externalities, policymakers would:

• A)impose a tax on the amount consumed in order to achieve the socially optimal level.
• B)mandate consumption of the good at the socially optimal level.
• C)provide a subsidy per unit of the good consumed in order to achieve the socially optimal level.
• D)do nothing, since the market will achieve the socially optimal level without government intervention.

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Definitions:

Price Control

Government-imposed limits on the prices that can be charged for goods and services in the market, aimed at managing affordability and stabilizing the economy.

Shortage

A condition in which the amount of a good offered for sale by producers is less than the amount demanded by buyers at the existing price. An increase in price would eliminate the shortage.

Price Ceiling

A legal maximum price that can be charged for a good or service, above which it cannot rise, often set by government.

Shortage

A market condition in which the demand for a product exceeds its supply at a particular price.