If the Production of a Good Creates Large Spillover Benefits

question 208

Multiple Choice

If the production of a good creates large spillover benefits on others, the government might correct for the:

• A)​overallocation of resources to its production by subsidizing it.
• B)​overallocation of resources to its production by imposing a tax on it.
• C)​underallocation of resources to its production by subsidizing it.
• D)​underallocation of resources to its production by imposing a tax on it.

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Definitions:

Franchise

A business model where one party (the franchisor) grants another party (the franchisee) the rights to use its trademark and business systems and processes to produce and market goods or services according to certain specifications.

Partnership

A legal form of business operation between two or more individuals who share management and profits.

Termination Provisions

Clauses within contracts that detail the conditions under which the agreement may be ended by either or both parties.

Franchise Contract

A legal agreement where a franchisor grants the franchisee the rights to use the brand, operating systems, and products or services of the franchisor for a specified period.