A Positive Externality Exists and Government Wants to Apply a Per-Unit

question 55

Multiple Choice

A positive externality exists and government wants to apply a per-unit subsidy in order to bring about the socially optimal output. Under what condition will the solution (of the subsidy) be worse than the problem (the market failure) ?

• A)Under the condition that the subsidy is greater than the marginal external benefit (associated with the positive externality).
• B)Under the condition that the post-subsidy output is not farther away from the socially optimal output than the pre-subsidy output is from the socially optimal output.
• C)Under the condition that the post-subsidy output is farther away from the socially optimal output than the pre-subsidy output is from the socially optimal output.
• D)Under the condition that the subsidy is less than the marginal external benefit (associated with the positive externality).

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Definitions:

Anticipate Views

The ability to predict or consider how others might perceive or interpret events or actions.

Selective Attention

The cognitive process of focusing on specific stimuli while ignoring others, essential for information processing.

Natural Selection

The process by which organisms better adapted to their environment tend to survive and produce more offspring, a key mechanism of evolution.

Thought Processes

Thought processes refer to the mental activities involved in understanding, processing, and communicating information.