Use the Following to Answer Questions

question 30

Multiple Choice

Use the following to answer questions :
Figure: City with Two Polluters
-Betsy loves to garden,and her rose garden is enjoyed by everyone in her neighbourhood.Because her consumption of rosebushes provides a positive externality to the community,the government should _____ because the market quantity of rosebushes is _____ than the socially optimal quantity.

• A) provide a subsidy;greater
• B) impose a tax;lower
• C) provide a subsidy;lower
• D) impose a tax;greater

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Definitions:

Natural Monopoly

A market condition where a single supplier is most efficient in producing the good due to the high fixed or start-up costs associated with the industry.

Entire Range

The complete spectrum or scope of something, from one end to the other, without any exclusions.

Public Interest Theory

A theory suggesting that government regulation is driven by the need to protect the public from market failures and ensure the well-being of society.

Natural Monopoly

A market condition in which a single company can supply a product or service at a lower cost than any potential competitor, leading to a dominant position that discourages others from entering the market.